Ten of the Most Traded Commodities in the World

March 03, 2021 09:53 UTC

The commodity market is popular with many traders, partly because of the high levels of volatility which can be present, allowing traders to profit from both rising and falling prices. Moreover, commodities offer traders and investors an opportunity to diversify their portfolio, which is an important part of risk management

In this article, we will take a close look at ten of the most traded commodities in the world, what drives their prices and how you can trade them!

the Most traded commodities

What Are Commodities?

Commodities can be either raw materials or agricultural products which, although sometimes a good in their own right, are generally used as the “building blocks” for other goods and services. The word commodity, therefore, covers a myriad of different goods, from sugar to crude oil, from cotton to steel.

Commodities of the same type and the same quality tend to be interchangeable, or fungible, with each other and, therefore, hold the same value to consumers.

For example, coffee produced in Colombia will have more or less the same value as coffee produced in Kenya, provided they are of the same quality.

Ten of the Most Traded Commodities

Over the next few sections, we are going to take a close look at ten of the most traded commodities in the world, which are as follows:

  1. Brent Crude Oil
  2. WTI Crude Oil
  3. Natural Gas
  4. Gold
  5. Silver
  6. Copper
  7. Coffee
  8. Sugar
  9. Cocoa
  10. Cotton

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Brent Crude Oil

The first two entries on our list should come as little surprise, even to people completely unfamiliar with commodity trading. 

Despite moves towards greener energy in recent years, crude oil is still very much in high demand. It powers our cars, heats our homes and produces fertilisers, pesticides and plastic. 

Brent Crude is one of two major types of crude oil which act as global benchmarks for the industry, the other being WTI crude. Brent Crude is extracted from the North Sea and can be described as a light, sweet crude. Light because of its low density and sweet because of its low sulphur content. Both of these qualities result in Brent Crude being relatively easy to refine.

What Affects its Price?

Like all goods, the price of Brent Crude is dependent on factors which govern global supply and demand. However, crude oil is well known for being particularly sensitive to geopolitical events.

It would take a separate article to discuss in detail everything which affects the price of crude oil, so here we will just look at one of the main factors from both the demand side and the supply side.

Global demand for oil, and therefore its price, is correlated with economic performance. In times of economic boom, demand for oil increases to satisfy increased production and transportation, driving up prices. Conversely, during an economic turndown, demand for oil, and therefore its price, decreases.

Global supply of crude oil is largely influenced by the Organisation of the Petroleum Exporting Countries (OPEC), which regularly sets production quotas for its member countries in order to assert pressure on global oil prices as required.

Brent Weekly ChartDepicted: Admiral Markets MetaTrader 5 - Brent Crude Weekly Chart. Date Range: 7 June 2015 - 3 March 2021. Date Captured: 3 March 2021. Past performance is not necessarily an indication of future performance.

WTI Crude Oil

The second entry on our list of the most traded commodities is another type of crude oil. West Texas Intermediate (WTI) crude acts as another benchmark for global oil prices. It is drilled in various states throughout the US and is also described as sweet and light, having even lower sulphur content and density than Brent Crude.

What Affects its Price?

The factors which affect the price of WTI are largely the same as those which affect Brent Crude. Historically, WTI prices depended heavily on the level of demand in the US. This was because Cushing, Oklahoma, where the crude oil is transported to once drilled, is landlocked, which made international export cumbersome. 

However, the Seaway Pipeline, which runs between Cushing and Texas and was previously used to run oil from Texas to Cushing, was reversed and began to run oil to Texas from Cushing. This made WTI easier to export, which helped to bridge the gap between WTI and Brent Crude, seeing their prices become more closely correlated than before.

WTI Weekly ChartDepicted: Admiral Markets MetaTrader 5 - WTI Crude Weekly Chart. Date Range: 7 June 2015 - 3 March 2021. Date Captured: 3 March 2021. Past performance is not necessarily an indication of future performance.

Natural Gas

Natural gas is an important source of global energy, which is found deep below the surface of the earth. Although a non-renewable energy source, natural gas is by far the cleanest burning fossil fuel and is very versatile, meeting a lot of the same needs as crude oil.

The International Energy Agency (IEA) estimates that demand for natural gas will increase 30% by 2040, highlighting the global importance of this fuel.

What Affects its Price?

Much like crude oil, demand for natural gas tends to increase during times of strong economic performance, which drives up price. In times of weak economic performance, the opposite is true.

Other factors affecting price include; the seasons - due to demand increasing in the winter for heating - technological advances which may improve gas production and natural disasters which may threaten supply.

Natural Gas Weekly chartDepicted: Admiral Markets MetaTrader 5 - NGAS Weekly Chart. Date Range: 7 June 2015 - 3 March 2021. Date Captured: 3 March 2021. Past performance is not necessarily an indication of future performance.

Gold

A precious metal which has been sought after for centuries, gold is now primarily used for jewellery production and as a vehicle for investment. Gold is primarily mined in China, Australia, Russia and the US.

It is considered a safe haven asset as it tends to retain value or even rise in price during times of economic and political upheaval. Therefore, in times of uncertainty, investors are inclined to shy away from other investments, preferring instead to put their money into safe haven assets, such as gold.

What Affects its Price?

Due to its reputation as a safe haven asset, demand for gold tends to increase during economic uncertainty, which in turn can drive up price. Furthermore, gold can be used to hedge against inflation or currency devaluation, meaning that its price tends to have an inverse relationship with the US dollar.

Gold Weekly ChartDepicted: Admiral Markets MetaTrader 5 - Gold Weekly Chart. Date Range: 5 July 2015 - 3 March 2021. Date Captured: 3 March 2021. Past performance is not necessarily an indication of future performance.

Silver

Another precious metal, silver has also been historically sought after by mankind. Unlike gold, around half of silver’s demand arises from its industrial uses, such as in solar panels and electrical products.

However, like gold, a lot of its demand is controlled by jewellers and investment. Whilst silver is also considered a safe haven asset, it is not seen to be as reliable as gold due to the fact that gold's value is less dependent on industry.

What Affects its Price?

As noted, silver is a safe haven asset and so its price will often rise during times of economic turmoil. Silver is most often extracted from the ores of other metals, meaning that fluctuations in the price of these other metals will also affect the price of silver.

Silver Weekly ChartDepicted: Admiral Markets MetaTrader 5 - Silver Weekly Chart. Date Range: 14 June 2015 - 3 March 2021. Date Captured: 3 March 2021. Past performance is not necessarily an indication of future performance.

Copper

Copper is a very important metal in the modern world. As it is an excellent conductor of electricity and heat, it is widely used in the electronics and building industries. Chile is an important producer, accounting for 28% of total global copper production in 2019. Peru, China and the US, to name a few, are also important, though smaller, producers.

What Affects its Price?

Due to its use in manufacturing, the price of copper is highly dependent on economic output, therefore, demand for the base metal is seen as a reliable indicator of economic health. 

Emerging markets which are rapidly developing account for a large proportion of the copper market due to their increased need for new accommodation, transport infrastructure and electronics. A slow down in the growth of emerging markets can have a large negative impact on the price of copper and vice versa.

Copper Weekly ChartDepicted: Admiral Markets MetaTrader 5 - Copper Weekly Chart. Date Range: 14 June 2015 - 3 March 2021. Date Captured: 3 March 2021. Past performance is not necessarily an indication of future performance.

Coffee

With an estimated 2.25 billion cups drank a day across the globe, it should come as little surprise that coffee is on our list of the most traded commodities. Coffee beans are grown in more than 50 countries, in what is known as the “coffee belt”, with its largest producer being Brazil.

There are two main varieties which account for the vast majority of coffee production: arabica and robusta. Arabica is generally considered to be higher quality, making it more popular, accounting for around 60% of total coffee consumption.

When it comes to trading, arabica tends to have more stable pricing, while the price of robusta is generally more volatile.

What Affects its Price?

The price of agricultural commodities, also known as soft commodities, can be strongly influenced by weather conditions. Unfavourable conditions will hamper production, reducing global supply and thereby increasing price. Of course, the opposite is also true.

Soft commodities are also at danger of plant diseases affecting the harvest. In 2012, for example, a disease known as “Coffee Leaf Rust'' affected various coffee producing countries in Latin America and the Carribean. The resultant crop loss caused a sharp drop in supply and an increase in the price of coffee.

Over 65% of coffee is produced by only five countries, meaning that if there is political or social upheaval in one of these countries, global supply can be drastically impacted. The coffee markets tend to react very quickly to any adverse events in production countries.

Despite its high level of global consumption, coffee is not a necessity. This means that its global demand can increase and decrease in line with economic health.

Arabica Weekly ChartDepicted: Admiral Markets MetaTrader 5 - Arabica Weekly Chart. Date Range: 12 April 2015 - 3 March 2021. Date Captured: 3 March 2021. Past performance is not necessarily an indication of future performance.

Sugar

Once a luxury reserved for the wealthy and referred to as “white gold” by those who first traded it, sugar has long been a highly sought commodity. Its use in food and drinks all over the globe, together with other lesser known uses, such as in medical equipment and beauty products, make sugar one of the most commonly traded commodities on the market.

What Affects its Price?

Although sugar is far more accessible these days, it is still considered somewhat of a luxury good, meaning that, as with other commodities on this list, its demand and therefore price tends to be positively correlated with economic performance.

In most developed countries, health concerns related to the overconsumption of sugar are well known, which is a factor which may cause decreased demand and lower prices in the future. In the UK, for example, a “sugar tax” was introduced in 2008 which targeted soft drinks containing a certain amount of sugar in them. 

Sugar Weekly ChartDepicted: Admiral Markets MetaTrader 5 - White Sugar Weekly Chart. Date Range: 14 June 2015 - 3 March 2021. Date Captured: 3 March 2021. Past performance is not necessarily an indication of future performance.

Cocoa 

Cocoa is used to produce one of the world’s favourite products, chocolate. The Mayans reportedly first cultivated this commodity over 5,000 years ago and today the annual consumption of cocoa is estimated at around 4.5 million tons!

The production of cocoa is mainly concentrated in West Africa and Latin America, with West Africa accounting for 65% of global production. The vast majority of commodities are traded in US dollars, however, cocoa is one of the last remaining which is still typically traded in British pounds.

What Affects its Price?

As with other soft commodities, weather plays an important role in the global supply of cocoa. Moreover, cocoa crops can succumb to a variety of plant diseases which have a disastrous impact on output. For example, in 2010 the “Black Pod” disease resulted in half a million tonnes of cocoa being lost. Based on the earlier estimation of annual consumption, that accounted for over 11% of total demand!

The vast bulk of cocoa production takes place in West Africa and, unfortunately, it is not uncommon for the producing countries to suffer from political uncertainty, corruption or social unrest. These factors can disrupt production or supply chains, causing volatility in the price.

Cocoa Weekly ChartDepicted: Admiral Markets MetaTrader 5 - Cocoa Weekly Chart. Date Range: 8 March 2015 - 3 March 2021. Date Captured: 3 March 2021. Past performance is not necessarily an indication of future performance.

Cotton

The majority of people reading this article will most likely be currently wearing at least one item of clothing made using the final item on our list of the most traded commodities! 

But besides clothing and household items, cottonseed is also used as feed for livestock, it is made into oil which is subsequently used in the manufacturing of soap, margarine, rubber and plastics. Linters, which are fibers found on cottonseed are also used to make bandages and bank notes.

India, China and the US are the largest three producers of cotton in the world.

What Affects its Price?

Just like any other agricultural commodity, cotton production can be affected by weather conditions.

In recent years, China has stockpiled supplies of cotton, to ensure they have an adequate amount. This has caused a higher price for cotton in China. If China were to release these stockpiles into the market, it would have a negative impact on global price due to the market being oversupplied. On the other hand, should they continue stockpiling, it could lead to a global shortage and an increase in prices.

The US, as with various other governments, heavily subsidises its cotton farming industry. This effectively enables them to keep the supply of cotton high and prices low.

Recently, there have been numerous allegations that China is producing cotton using forced labour. This has already caused various cotton consumers to boycott Chinese cotton and could lead to countries placing sanctions on China. Due to China accounting for a large percentage of global supply, this could cause prices to increase in the future.

Cotton Weekly ChartDepicted: Admiral Markets MetaTrader 5 - Cotton Weekly Chart. Date Range: 19 April 2015 - 3 March 2021. Date Captured: 3 March 2021. Past performance is not necessarily an indication of future performance.

How Can I Trade These Commodities?

Commodities are tangible assets which can be bought or sold. Of course, buying these products in large quantities presents logistical challenges for traders looking to make a profit.

However, traders can use financial instruments to speculate on the prices of commodities without ever taking ownership of the physical asset. Below are some of the most common methods of trading commodities:

Trade Commodity CFDs with Admiral Markets

You might be interested to hear that with Admiral Markets, you can trade every commodity listed in this article using CFDs! In order to get started, follow these steps:

  1. Open an account with Admiral Markets
  2. Download the MetaTrader 5 trading platform
  3. Open and log in to MetaTrader 5
  4. Head to the “Market Watch” window on the left-hand side of the screen. If it is not already displayed, you can open it by clicking Control + M. From here, search for the commodity CFD you wish to trade, as shown in the image below:

Market Watch MetaTrader 5

Depicted: Admiral Markets MetaTrader 5 - Market Watch

  1. Select the desired symbol and hit enter to add it to Market Watch
  2. Right click on the symbol and select “Chart Window” to bring up the price chart
  3. Click “New Order” at the top of the screen to open a position

Copper Daily Chart New OrderDepicted: Admiral Markets MetaTrader 5 - Copper Daily Chart - New Order. Date Range: 7 January 2020 - 3 March 2021. Date Captured: 3 March 2021. Past performance is not necessarily an indication of future performance.

Trade Commodity CFDs With Admiral Markets

With a Trade.MT5 account from Admiral Markets, you can trade CFDs on commodities and a range of other financial instruments! CFDs allow traders to attempt to profit from both rising and falling prices and also benefit from the use of leverage. Click the banner below to open an account today:

Trade Commodity CFDs with Admiral Markets

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About Admiral Markets

Admiral Markets is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Roberto Rivero
Roberto Rivero
Financial Writer, Admirals, London

Roberto spent 11 years designing trading and decision-making systems for traders and fund managers and a further 13 years at S&P, working with professional investors. He has a BSc in Economics and an MBA and has been an active investor since the mid-1990s