Oil Commodity Trading

Oil commodity trading among other commodities has been very much in demand. This is evident from the fact that the cost of oil has risen over the years. There are many factors, which have contributed to the escalations. The write up below reveals certain essential features of oil commodity trading and comparison of oil prices.
Oil commodity trading has become very much pronounced in the last couple of years and this is evident from the fact that the hedge funds as well as increased number of buyers as well as investors have pushed the price of oil to $75.17 per barrel(as of 2005 end) from $50 per barrel on the NYME or New York Mercantile Exchange.

Other factors, which have helped in the rising price of oil in the commodity market is its utility. In addition to serving as a fuel in airplanes, automobiles, trains and a means of generating electricity, oil is regarded as an asset.

Oil commodity trading has increased over the years due to the fact that at the end of 2002, the cost of oil was $18 per barrel. Reports suggest that oil contracts on the NYMEX were held by hedge funds, which were mostly used as instruments for private investment.
These hedge funds were controlled by traders mostly the well off institutions. There were as many as 1 billion barrels in the month of May 2006 several times more than what it was in the year 2001.

It was observed that not only had the number of future exchanges escalated in the United States of America(as of 2006), Atlanta future exchange recorded maximum oil commodity trading during the year 2006. Majority of the futures in commodity trading were funded by money from pension funds.

The main cause of concern in the future commodity markets can be attributed to the fact that the markets are very risky and hence volatile.

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Last Updated on : 27th June 2013

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