Energy Futures Overview
Energy resources are essential to the everyday life of ordinary people like you and me. These valuable resources include crude oil, natural gas, heating oil, coal and gasoline. Energy commodities are traded on the energy commodity markets around the world. Oil and natural gas provide the raw materials for electricity which is necessary for the operation of many businesses as well as for the provision of power across the world. Natural gas is used for cooking and heating oil provides heat to shield against cold weather. Gasoline is used as fuel for transportation purposes as well as other purposes.
History of Trading Energy on the Commodities Markets
The first place in recorded history where commodities trading took place in an official manner, was the Amsterdam Stock Exchange. On this market, traders were involved in short selling and trading through forward contracts and options. This was as early as the year 1530. Over time, the trading of commodities became more popular across several cities around the world. However, up until the 1800s, commodities trading was a rare occurrence.
By 1864, the Chicago Board of Trade (CBOT) was established in Chicago in the United States. This exchange started with the trading of agricultural commodities such as wheat, soybeans, and corn. As time evolved, rules were implemented regarding the quality standards that were required in order to participate in the commodities trading markets. The Commodity Price Index (CPI) was developed in 1934 and consists of a list of commodities and their corresponding prices. This index is still used today. Commodity Index Funds were established in the 1990s and are funds where the resources are invested in financial instruments that are linked to commodities.
Due to the volatility of energy commodity prices such as oil prices and gasoline prices, a futures market quickly developed for energy commodities. These futures contracts provide a hedge against price volatility by locking in prices.
Top Energy Commodity Exchanges
Some of the more popular commodity exchanges on which energy is traded include:
• European Energy Exchange (EEX)
• Chicago Mercantile Exchange (CME)
• New York Mercantile Exchange (NYMEX)
• Australian Securities Exchange (ASX)
• NYSE Euronext
• Tokyo Commodity Exchange (TOCOM)
• Multi Commodity Exchange (MCX)
The World Bank has published a commodity trading outlook report for 2017.