Commodities

Commodities

Abstract

Commodities

What is a commodity; well let’s say that a commodity is the raw material of almost everything we consume or use in our everyday life. Some of the most common commodities are corn, wheat, gold, silver, copper, oil, gas, cattle, sugar, coffee and cotton. Commodities are traded with futures contracts on a futures exchange and are administered by the same common significances as stock futures. The Chicago Mercantile Exchange (CME Group) and the Intercontinental Exchange (ICE Futures) are the two largest exchanges in the U.S. Commodities are highly leveraged investment and can be very volatile.

I will focus my attention on the well-known commodity known as crude oil. There are different variations of crude oil in that there viscosity and appearance are different from one oil field to another. They differ in odor, color and in the basic properties and qualities. All forms of crude oil are basically made up of hydrocarbons, nitrogen, oxygen, metals and sulfur, but there are differences in their properties and molecular structure.

Here are the basic categories of crude oils and their use today:

(1) The Very Light Oils are used for today’s Jet Fuel, Gasoline, and Kerosene. These oils are extremely explosive and evaporate quickly, which decreases toxicity levels.

(2) Light Oils include Most Grade 1 & 2 Fuel Oils and Diesel Fuel Oils, and include Most Domestic Fuels and Light Crude Marine Gas Oils. These oils are somewhat unstable,

Evaporate slower and are somewhat toxic.

(3) Medium Oils: This is the type of crude oil on the market these days. Low volatility and increased toxicity levels make oil spill clean ups more difficult, which can be observed from oil spill in the oceans and lands around the world.

(4) Heavy crude oils which include grades 3,4,5 and 6 Fuel Oils as well as Intermediate and Heavy Marine Fuels. There is very little evaporation and therefore toxicity is much higher. This means that there is the...