Glossary of Terms
Commodity Markets Glossary
Explore our commodity markets glossary covering trading, shipping, logistics, derivatives, pricing, and market terminology used across global commodity markets.
Whether you work in energy, metals, agriculture, shipping, or commodity finance, this glossary explains key terms used by traders, brokers, analysts, operators, and hiring managers across the sector.
0 terms shown
A
Accumulation
The gradual building of a position in a commodity or related contract over time.
Actuals
Physical commodity cargo or inventory available for delivery, shipment, or processing.
Aframax
A medium-sized tanker class typically used in crude and refined products shipping, generally around 80,000 to 120,000 deadweight tonnes.
Alloys
Materials made by combining a metal with one or more other elements to improve strength, durability, or corrosion resistance.
Aluminium / Aluminum
A lightweight industrial metal widely used in transport, packaging, and construction.
Analyst
A market professional who researches prices, supply-demand balances, trade flows, and macro factors to support commercial or trading decisions.
Arbitrage
The simultaneous purchase and sale of the same or closely related commodity in different markets to profit from price differences.
Arabica
A premium coffee variety widely traded in global soft commodity markets.
B
Backwardation
A market structure in which near-term prices are higher than prices for delivery further in the future.
Baltic Dry Index (BDI)
An index that tracks the cost of shipping dry bulk commodities such as iron ore, coal, and grain.
Barrel (Oil)
A standard unit of volume used in the oil market, equivalent to 42 US gallons.
Base Metals
Industrial non-ferrous metals such as copper, aluminium, nickel, lead, tin, and zinc.
Basis
The difference between the spot price of a commodity and its futures price, or between local physical pricing and a benchmark market.
Basis Risk
The risk that the hedge instrument and the underlying physical exposure do not move perfectly together.
Bid
The highest price a buyer is willing to pay for a commodity or contract at a given time.
Bill of Lading
A legal transport document issued by a carrier confirming receipt of cargo for shipment.
Brent Crude
A major global benchmark for pricing crude oil, especially for Atlantic Basin and internationally traded grades.
Broker / Brokerage
A person or firm that executes trades or intermediates deals between buyers and sellers.
Bunker Fuel
Fuel used to power ships, including marine fuel oils and related marine energy products.
C
Calendar Spread
A trade that profits from the price difference between two delivery months of the same commodity contract.
Call Option
An option giving the buyer the right, but not the obligation, to buy a commodity or contract at a specified price before or on expiry.
Carbon Credit
A tradable certificate or allowance linked to the right to emit a certain amount of carbon dioxide or equivalent greenhouse gases.
Carry / Cost of Carry
The total cost of holding a commodity over time, including storage, insurance, financing, and sometimes transport.
Cash Market
The market for the immediate purchase and sale of physical commodity for prompt delivery.
CBOT
The Chicago Board of Trade, a major exchange for agricultural and other futures contracts.
CFTC
The US Commodity Futures Trading Commission, the main regulator of US futures and derivatives markets.
Clearing
The post-trade process that confirms, matches, margins, and settles transactions between counterparties.
Clearinghouse
A central counterparty that stands between buyers and sellers in exchange-traded markets and guarantees financial settlement.
CME
The Chicago Mercantile Exchange, one of the world’s largest derivatives exchanges.
Contango
A market structure in which forward or futures prices are higher than the current spot price or nearby delivery month.
Contract Grade
The quality specification defined by an exchange or contract for deliverable commodity.
Copper
A widely traded industrial metal used heavily in power, construction, and electronics.
Crop Year
The 12-month marketing or production cycle associated with a particular agricultural commodity.
Crude Oil
Unrefined petroleum extracted from underground reservoirs before processing into fuels and petrochemicals.
D
Day-Ahead Market
A power or energy market where contracts are traded for delivery on the following day.
Demurrage
A charge payable when cargo is not loaded or discharged within the agreed laytime.
Derivative
A financial instrument whose value is linked to an underlying commodity, index, freight route, or other market variable.
Differential
A premium or discount applied to a benchmark price to reflect differences in quality, location, timing, or logistics.
Distillate
A refined oil product separated during the distillation process, including diesel, gasoil, and jet fuel.
DWT (Deadweight Tonnage)
A measure of how much weight a vessel can safely carry, including cargo, fuel, stores, and crew.
E
EEX
The European Energy Exchange, a major marketplace for power, gas, and environmental products.
Emissions
Greenhouse gases or pollutants produced through industrial or energy activity, often subject to regulation or trading schemes.
Energy
A broad commodity sector covering oil, gas, power, coal, renewables, and related environmental products.
ETF
An exchange-traded fund that tracks a basket of assets, an index, or a commodity exposure.
Expiry
The date on which a futures or options contract ceases trading or reaches maturity.
F
FFA (Freight Forward Agreement)
A financial contract used to hedge or speculate on future freight rates on specific shipping routes.
FOB (Free on Board)
An Incoterm under which the seller delivers the cargo on board the vessel, after which risk transfers to the buyer.
Forward
A private agreement to buy or sell a commodity at a specified price for future delivery, usually traded OTC.
Forward Curve
A series of prices for the same commodity across different future delivery dates.
Freight Rate
The price paid to transport commodity cargo from one location to another.
Futures Contract
A standardised agreement traded on an exchange to buy or sell a commodity at a fixed price for delivery or settlement at a future date.
G
Gasoline
A refined petroleum product used mainly as road transport fuel.
Gold
A precious metal used in jewellery, investment products, and as a store of value.
Grain
A category of agricultural commodities including wheat, corn, rice, barley, and similar crops.
H
Handysize
A small bulk carrier vessel class commonly used in regional and flexible trade routes.
Hard Commodities
Commodities that are mined or extracted, such as metals, ores, and energy products.
Hedging
The process of reducing price risk by taking an offsetting position in a futures, forward, option, or swap market.
I
ICE
Intercontinental Exchange, a major global exchange operator for energy, softs, emissions, and financial futures.
Incoterms
International commercial trade terms that define delivery obligations, costs, and transfer of risk between buyer and seller.
Initial Margin
The collateral required to open a futures or cleared derivatives position.
J
Jet Fuel
A refined petroleum product used in aviation turbine engines.
K
Kerosene
A middle distillate petroleum product used in heating and aviation-related applications.
Kilowatt (kW)
A unit of power equal to 1,000 watts.
L
Laytime
The agreed amount of time allowed for loading or discharging cargo.
Letter of Credit
A bank-issued payment undertaking used in trade finance to reduce seller payment risk.
Leverage
The use of borrowed capital or margin to control a larger nominal exposure.
LME (London Metal Exchange)
The world’s leading exchange for industrial metals trading and price discovery.
Long Position
A position that benefits if the price of a commodity or contract rises.
Lot
The standardised trading quantity defined by an exchange contract.
M
Maintenance Margin
The minimum level of collateral that must be maintained to keep a margined position open.
Margin
Collateral posted to support a futures or cleared derivatives position.
Mark-to-Market
The daily revaluation of open positions using current market prices.
Market Maker
A participant that continuously quotes both bid and offer prices to support liquidity.
N
Natural Gas
A gaseous fossil fuel used in power generation, heating, and industrial processes.
NYMEX
The New York Mercantile Exchange, a major venue for energy and other commodity futures.
O
Offer / Ask
The lowest price a seller is willing to accept for a commodity or contract.
Open Interest
The total number of outstanding futures or options contracts that have not yet been closed or settled.
OTC (Over the Counter)
Trading that takes place directly between counterparties rather than on a central exchange.
P
Physical Trading
The buying, selling, transporting, storing, and delivering of actual commodity cargo rather than only financial exposure.
Position Limit
A regulatory or exchange-imposed cap on how large a position a market participant may hold.
Premium / Discount
An amount added to or deducted from a benchmark price to reflect quality, location, timing, or other market features.
Prompt Month
The nearest actively traded delivery month or period in a forward market.
Put Option
An option giving the buyer the right, but not the obligation, to sell a commodity or contract at a specified price before or on expiry.
R
Refining Margin / Crack Spread
The difference between the value of refined products and the cost of crude oil input.
Roll / Rolling
The process of closing an expiring contract and opening a later-dated one.
S
Settlement Price
The official price determined by an exchange for valuing contracts at the close of trading.
Short Position
A position that benefits if the price of a commodity or contract falls.
Soft Commodities
Agricultural products that are grown rather than mined, such as coffee, cocoa, cotton, and sugar.
Speculator
A participant who takes market risk in pursuit of profit rather than to hedge a direct physical exposure.
Spot Price
The current market price for immediate delivery of a commodity.
Swap
A financial contract in which counterparties exchange cash flows linked to a reference price, rate, or index.
T
Thermal Coal
Coal used primarily for electricity generation and industrial heat.
Tick
The minimum permitted price movement for a futures contract.
Trade Finance
Banking and credit structures used to fund the movement of commodity cargoes and reduce payment risk.
U
Upstream
The exploration and production stage of the oil and gas value chain.
V
Variation Margin
The daily collateral exchanged to reflect mark-to-market gains and losses on cleared positions.
Volume
The number of contracts or quantity traded over a given period.
W
WTI Crude
West Texas Intermediate, a major benchmark for US crude oil pricing.
Z
Zinc
An industrial metal widely used for galvanising steel and protecting against corrosion.