Using a Commodity Chart

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Commodity charts gives you historical data but also provides a glimpse into the future

A commodity chart gives you an indication of the current spot price for that commodity. Generally, prices of commodity related stocks rise because the spot price of the actual commodity is about to or is currently increasing.

The price of crude oil is generally quoted in US$ per barrel. The New York Mercantile Exchange or NYMEX Natural gas prices are commonly quoted in US$ per million BTUs. Coal is quoted in larger volumes which in the charts below is the short ton (2000 pounds or 907 kg). The uranium spot price is quoted on a per pound basis.

In this series of free commodity charts, medium term charts showing the delayed spot price of West Texas Intermediate and Brent oil per barrel are shown.

Prior to purchasing an oil company, you might want to have an idea on what the price of oil is doing. This could be one way you would reduce your risk. Although there are times when a company will move on it's own news.

In the chart below you will see the five year price of crude oil. There can be a difference between the Brent and West Texas Intermediate (WTI) oil price. Sometimes they align while at other times there is a large difference between the two. The difference in price can be reflected in the quality and ability of the product to get to the markets that pay the the most. WTI or Texas light oil is generally considered to be the higher quality oil while Brent can get to more markets easier. So therefore price differential between them will vary depending on what is going on at the time.

Coal and natural gas are other energy related commodities. Natural gas is generally used for the production of electricity and as a fuel source for home and industrial heating. It's markets are limited as it needs to be shipped by pipeline or liquified and shipped by boat.

There are two major types of coal are thermal coal and metallurgical coal. Metallurgical coal also known as hard coking coal, is a higher quality coal and generally much higher in price. It is generally sold via contracts between the producer and user. To find the approximate price of metallurgical coal it is suggested that you read the quarterly financial statements of companies that sell metallurgical coal such as Teck Resources (symbol TCK.B on the Toronto Stock Exchange), Alpha Natural Resources (symbol ANR on NYSE) or Arch Coal (symbol ACI on NYSE).

The market for thermal coal is much larger. It is generally used in coal fired electrical plants. A one year chart of thermal coal is shown below.

Coal can be used to forecast the economy. As an expanding economy uses steel (metallurgical coal) and electricity (thermal coal) when the price of coal is moving up the economy could be considered to be expanding.

Using a base metal or precious metal commodity chart can give you a leg up on your stock trading. It gives you a bit more information that may keep you ahead of the crowd.

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