Commodities, the raw materials of the economy.
What commodities are, what moves their prices, and how energy, farm products and industrial metals are traded.
What commodities are
Commodities are raw materials and farm products bought and sold in bulk: crude oil and natural gas, wheat and coffee, copper and aluminium. Any unit of a commodity of a given grade counts as the same as any other, which is what lets it be traded without anyone inspecting a particular cargo.
Most commodity trading happens through futures contracts: agreements to buy or sell a set quantity at a set price on a later date. Producers use them to fix the price of what they will sell, buyers to fix the cost of what they will need, and traders to take a view on where prices will go.
Gold, silver and the other precious metals are commodities too, and have a page of their own.
Commodity markets at a glance
WTI and Brent crude are shown in US dollars per barrel. Natural gas, copper, wheat and corn are Bloomberg commodity index levels, shown in index points rather than as commodity prices.
What moves commodity prices
Supply
Weather, harvests, decisions by producing countries and disruption to mines, pipelines or shipping change how much of a commodity reaches the market.
Demand and the economy
When factories, building and transport are busy, they use more energy and metals, so prices tend to follow the outlook for growth.
The US dollar
Most commodities are priced in US dollars. A stronger dollar makes them dearer for buyers who pay in other currencies, which can weigh on prices.
Stockpiles and seasons
Regular reports on stockpiles and crops can move prices when they come out, and demand follows the calendar, from winter heating to the harvest.
How commodities trade
Prices and units
Each commodity is priced in its own unit: crude oil by the barrel, grains by the bushel or the tonne, industrial metals by the tonne. Most are priced in US dollars.
Spread
Every commodity has a buy price and a slightly lower sell price. The gap between them is the spread, a cost paid on every trade.
Contract size
A position gains or loses a set amount of money for each step the price moves, and that amount depends on the size of the position. The contract sizes Noryn Markets offers are confirmed on request.
Futures and rollover
A price for trading a commodity usually follows a futures contract, and every futures contract has an expiry date. Before it expires, a position that is to stay open moves to the next contract, which is called a rollover. The next contract can be priced higher or lower than the one it replaces, and how that difference reaches a position depends on the product. How Noryn Markets handles rollovers is confirmed on request.
Leverage and margin
Leverage lets you hold a position larger than the money you set aside for it, and the money set aside is the margin. Leverage magnifies losses as much as gains. If losses take the money in an account below the margin its positions need, positions can be closed automatically, at a loss. How much leverage is available differs by account type and by market, and the figures that apply to an account are confirmed on request through the contact form.
Trading hours
Hours differ by commodity. Energy and industrial metals trade for most of the day through the working week, while farm products have shorter sessions. Prices can move sharply when scheduled reports on stockpiles or crops come out. The trading hours Noryn Markets offers are confirmed on request.
Groups of commodities
Commodities fall into a few broad groups, described here by what they include. Which commodities Noryn Markets offers is confirmed on request.
Energy
Crude oil, including the Brent and West Texas Intermediate grades, natural gas, and refined products such as heating oil and petrol.
Grains and oilseeds
Wheat, corn and soybeans, whose prices follow harvests, the weather in growing regions and demand for food, animal feed and fuel.
Softs
Coffee, cocoa, sugar and cotton, called softs because they are grown rather than mined. Most come from a few regions, so weather and crop disease there can move prices sharply.
Industrial metals
Copper, aluminium, zinc and nickel, used in building, manufacturing and power networks, so their prices tend to follow industrial activity.
The risks
Leverage magnifies losses
A small move in a commodity price can cause a loss larger than the margin set aside for a position.
Supply shocks
A poor harvest, a pipeline outage or a decision by producing countries can move a price a long way in a short time.
Rollover
A position that follows futures contracts can be affected when one contract gives way to the next, including by the price difference between them.
Costs add up
Spreads and other charges are paid whether a trade gains or loses, and they add up over many trades or long-held positions.
Questions about commodities
Does trading a commodity mean taking delivery of it?
Not with a contract for difference, which follows a commodity’s price and is settled in money, so nothing is delivered. Futures contracts can end in delivery, which is why traders close or roll them over before they expire.
Why is there more than one price for crude oil?
Crude oil differs by where it comes from and how easily it is refined, so different grades have their own benchmark prices. Brent, from the North Sea, and West Texas Intermediate, from the United States, are the most widely quoted.
Why do commodity prices change with the seasons?
Supply and demand follow the calendar. Heating fuel is used most in winter, and crop prices react to planting, the growing season and the harvest.
Which commodities does Noryn Markets offer?
The page above sets out the broad groups — energy, metals and farm products — and how a commodity price is usually built on a futures contract. Which commodities Noryn Markets offers is confirmed on request through the contact form.
What are the trading hours for commodities?
Hours differ by commodity: energy and industrial metals trade for most of the day through the working week, while farm products keep shorter sessions. The hours that apply to an account are confirmed on request through the contact form.
Other markets
- Forex
Currency pairs, where one currency is priced against another.
- Indices
A single price that follows a basket of company shares.
- Precious metals
Metals valued for their scarcity and long history as a store of value.
- Shares
Prices that follow individual companies listed on stock exchanges.
- ETFs
Funds that trade on an exchange in the same way as a single share.
Interested in commodities?
Register your interest, and say which commodities you would like to hear about.
Open accountImportant information
Trading forex and contracts for difference involves a high level of risk, and it is not suitable for every investor. These products use leverage, which means a position can be held with only part of its value set aside as margin, and leverage magnifies gains and losses alike. A position may be closed when margin requirements are not met. Markets can move quickly, and at times a market can be difficult to trade at all. Past performance is not a reliable indicator of future results. Nothing on this website is investment advice or a recommendation, and nothing here takes account of your objectives, your experience or your circumstances. Consider your own circumstances, and seek independent advice before you act.
This page explains a market in general terms, for people deciding whether they want to learn more about it. It is not advice about that market or about any instrument in it, and naming something here does not mean it can be traded through Noryn Markets.