A commodity is a physical good with the same characteristics as other goods of the same type.
There should be a little or no differentiation between the same type of commodity supplied by different producers.
For example, a barrel of Brent crude oil from one producer should be similar to one supplied by another.
Financial commodity markets trade raw materials, such as ‘softs’ (coffee, cocoa, sugar; wheat); oil and gas; base metals (copper, aluminium, tin, zinc, lead and nickel) and precious metals (gold, silver, palladium and platinum).
Commodities are traded on financial markets using futures contracts that stipulate the quantity and quality standards of the commodities being traded. For example, oil is traded in lots of 100 barrels.
