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Energy Commodities

Energy Commodities

Energy commodities are mostly hard commodities that are mined or extracted. They include fossil fuels like coal, oil (in various blends and grades) and natural gas. The price of these commodities is one of the most watched economic indicators by traders, economists, governments and businesses given the correlation between economic growth and energy consumption. Oil was the first form of energy to be widely traded.

Due to the nature of obtaining them, energy commodity prices are influenced heavily by the weather, political and economic events, and global demand. Weather is especially important in the US Gulf Coast, where hurricane activity may halt production, leading to drops in oil inventories. Also of importance is very harsh winters which lead to increased demand of heating oil. Political unrest (such as Libya in 2011), sanctions (like Iraq in 1991 and Iran in 2013 / 2014) and production quota changes by the OPEC cartel are the greatest determinants of prices of energy assets.