Nature of commodity markets
By: Gaby, Besjane and Tsotlhe
Main prospects and problems of given commodity
Outline
- What is commodity and why
- Nature of commodity
- Main producers and consumers
- Geography and volumes of international trade flows
- Nature of commodity market price
Nature of commodity market price formation and regime
Geography and volumes of international trade flows
Non-fundamentals
- Financialization –combination of derivative products such as index
- fund and ETFs
- During the boom period there was a rapid growth of open interest in futures exchanges market by non-commercial speculators
- As well as the popularity of net long positions by institutional investors in commodities indexes
- Boom and bust are intesify by unexpected inflows and outflows
Main producers and consumers
- Russia: Average production per day: 10.5 million barrels a day
- Saudi Arabia:Average production per day: 10 million barrels a day
- United State of America: Average production per day: 9.2 million barrels a day
- Iraq:Average production per day: 4.3 million barrels a day
- China: Average production per day: 4.1 million barrels a day
Nature of commodity
What is commodity and why
- The Parties shall enter into exchange shall be: a buyer or a seller
- Each Party shall have an interest in buying or selling something that would interest another Party.
- Each Party shall be free in making proposals or reject the other.
- A market where commodity products are exchanged.
- A place for buyers and sellers trading raw or primary products.
- Raw materials that are into products then traded.
- Promoting commodity actors.
- Improving and encouraging business partners.
- Providing legal, financial, insurance, control service.
THANK YOU FOR YOUR ATTENTION
Geography and volumes of international trade flows
Nature of commodity market price
Main producers and consumers
Fundamentals
• Prices are defined by the interaction of supply and demand which are known as the Fundamental analysis.
• Which helps you to estimate a market price for commodities by using the law of supply and demand
• This Fundamental analysis helps us to analyze commodities and predict where the prices of commodities need to be trading and what they will do in the future.
• Long boom of 00s due to increase in demand for commodities from China
and other emerging economies.
• Supply and Demand of oil are inelastic in the short-run
Main consumers per day
- United states: 19 million
- China: 10.5 million
- Japan: 4.5 million
- India: 3.7 million
- Russia: 3.5 million