Oil commodity

Oil commodity

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This article needs additional citations for verification. This article needs to be updated. Please update this article to reflect recent events or newly available information. A commodity market is a market that trades in primary economic sector rather than manufactured products.

A financial derivative is a financial instrument whose value is derived from a commodity termed an underlier. Futures are traded on regulated commodities exchanges. Gold ETFs are based on “electronic gold” that does not entail the ownership of physical bullion, with its added costs of insurance and storage in repositories such as the London bullion market. Commodity-based money and commodity markets in a crude early form are believed to have originated in Sumer between 4500 BC and 4000 BC.

Sumerians first used clay tokens sealed in a clay vessel, then clay writing tablets to represent the amount—for example, the number of goats, to be delivered. Early civilizations variously used pigs, rare seashells, or other items as commodity money. Since that time traders have sought ways to simplify and standardize trade contracts. Gold and silver markets evolved in classical civilizations. At first the precious metals were valued for their beauty and intrinsic worth and were associated with royalty. In time, they were used for trading and were exchanged for other goods and commodities, or for payments of labor.

Beginning in the late 10th century, commodity markets grew as a mechanism for allocating goods, labor, land and capital across Europe. Between the late 11th and the late 13th century, English urbanization, regional specialization, expanded and improved infrastructure, the increased use of coinage and the proliferation of markets and fairs were evidence of commercialization. The Amsterdam Stock Exchange, often cited as the first stock exchange, originated as a market for the exchange of commodities. Early trading on the Amsterdam Stock Exchange often involved the use of very sophisticated contracts, including short sales, forward contracts, and options. Through the 19th century “the exchanges became effective spokesmen for, and innovators of, improvements in transportation, warehousing, and financing, which paved the way to expanded interstate and international trade. Reputation and clearing became central concerns, and states that could handle them most effectively developed powerful financial centers. In 1934, the US Bureau of Labor Statistics began the computation of a daily Commodity price index that became available to the public in 1940.

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