Table of contents
- What are commodity futures?
- The three main commodity sectors
- Who trades commodity futures?
- The most important commodity futures for European traders
- Why trade commodity futures?
- What drives commodity prices?
- Contango, backwardation and the futures curve
- How do you choose the right commodity market?
- Margin and leverage in commodity futures
- Physical delivery, settlement and rollover
- Strategies for commodity futures
- Example: an MCL trade after an EIA report
- Common mistakes when trading commodity futures
- Broker and tools for commodity futures
- Glossary
- Conclusion: commodity futures are about more than the price chart
- Sources
- FAQ
Quick summaryWhat you should know about commodity futures
- Commodity futures are often split into three main groups: metals, energy and agriculture.
- Gold, oil and natural gas are among the most widely used commodity contracts for active futures traders.
- Corn, soybeans, wheat and coffee are heavily influenced by weather, harvests, stockpiles, exports and official reports.
- Standard contracts can be large. Micro contracts like MGC, MCL and MNG make it possible to take smaller, more precise positions.
- Many commodity futures are physically deliverable. That means active retail traders normally need to close or roll the contract before the delivery period becomes relevant.
- Margin isn't the same as risk. Actual risk is determined by contract size, volatility, stop-loss and number of contracts.
Commodities are physical markets
When a trader trades commodity futures, they aren't just trading a chart. Behind the price move lies physical production, inventory, weather, transport, geopolitics, industrial demand, interest rates, currencies and expectations for global growth.
This is what makes commodity markets interesting, but also demanding. Gold can react to rates and the dollar. Oil can move on OPEC+ decisions, inventory data or conflict. Natural gas can react to a shift in the weather models. Corn, wheat and soybeans can move quickly when the USDA updates forecasts for harvest, exports or global stockpiles.
For European traders, futures are a direct way to get exposure to these markets without owning physical gold, barrels of oil, natural gas or grain.
What are commodity futures?
Commodity futures are standardised contracts for the purchase or sale of a specific quantity of a commodity at a future point in time. The contract defines, among other things, quality, quantity, delivery time and delivery location. This is what makes futures a standardised, exchange-listed product, unlike an ordinary private agreement between two parties.
In practice, different market participants use futures in different ways.
A producer can use futures to reduce the uncertainty in future income. A farmer can lock in a price for corn or soybeans before harvest. An airline can hedge part of its fuel cost. A gold producer can use futures to reduce the risk of a falling gold price.
A trader, on the other hand, often uses futures to speculate on the price movement. You can go long if you think the price will rise, or short if you think it will fall. You don't need to own the commodity physically, but you must understand the contract's size, tick value, expiry and settlement mechanism.
The three main commodity sectors
Metals
Metals markets are often split between precious metals and industrial metals.
Precious metals include gold, silver, platinum and palladium in particular. Gold is often followed as a market for interest rates, the dollar, geopolitical uncertainty and demand from central banks and investors. Silver has both a monetary and an industrial role, and can therefore be more volatile than gold.
Industrial metals include copper, aluminium and other metals used in industry, power grids, transport, construction and technology. Copper is often seen as a market that reacts to global industrial activity, Chinese demand and investment in electrification.
Energy
Energy markets include crude oil, natural gas, gasoline, diesel, power, refined products and certain environmentally related contracts.
WTI crude oil and Brent are among the most closely followed oil price benchmarks. WTI trades through CL on NYMEX, among others, while Brent is more important as the global reference for much of international oil trade.
Natural gas is driven more by regional conditions than oil. Henry Hub in the US is particularly influenced by weather, US production, storage, LNG exports and power demand.
Agriculture and soft commodities
Agricultural markets include corn, wheat, soybeans, soybean meal, soybean oil, rice and oats, among others. These are influenced by weather, harvests, exports, geopolitics, transport, fertiliser costs and global stockpiles.
Soft commodities include products like coffee, cocoa, sugar, cotton and orange juice. These are often more sensitive to production regions, disease, drought, frost, port capacity and regional weather conditions than the more macro-driven commodities.
ICE Coffee C futures, ticker KC, is the benchmark contract for Arabica coffee. The contract represents 37,500 pounds of coffee, has physical delivery, and a minimum price move of 0.05 cents per pound, equal to $18.75 per contract.
Who trades commodity futures?
The commodity futures market consists of far more than short-term traders.
| Participant | Why they trade |
|---|---|
| Producers | Lock in a future selling price |
| Consumers and industrial companies | Lock in purchase price and costs |
| Trading and logistics companies | Reduce price risk in physical goods flow |
| Banks and commodity houses | Provide liquidity, financing and risk management |
| Macro funds | Trade global economic and political themes |
| CTA and trend funds | Trade systematic trends across markets |
| Retail traders | Speculate on intraday or swing moves |
The CFTC publishes weekly Commitments of Traders reports that show positioning in futures markets. In the agricultural reports, reportable positions are broken down into commercial, non-commercial and index-related participants, among others. The reports can be used as context, but not as an isolated buy or sell signal.
The most important commodity futures for European traders
The table below shows some of the most relevant contracts for traders who want exposure to metals, energy and agriculture.
| Commodity | Ticker | Contract size | Minimum tick | Tick value | Settlement |
|---|---|---|---|---|---|
| Gold | GC | 100 troy ounces | $0.10 per oz | $10 | Physical delivery |
| Micro Gold | MGC | 10 troy ounces | $0.10 per oz | $1 | Physical delivery |
| Copper | HG | 25,000 lbs | $0.0005 per lb | $12.50 | Physical delivery |
| Micro Copper | MHG | 2,500 lbs | $0.0005 per lb | $1.25 | Financial settlement |
| WTI crude oil | CL | 1,000 barrels | $0.01 per barrel | $10 | Physical delivery |
| Micro WTI | MCL | 100 barrels | $0.01 per barrel | $1 | Financial settlement |
| Natural gas | NG | 10,000 MMBtu | $0.001 per MMBtu | $10 | Physical delivery |
| Micro Natural Gas | MNG | 1,000 MMBtu | $0.001 per MMBtu | $1 | Financial settlement |
| Corn | ZC | 5,000 bushels | $0.0025 per bushel | $12.50 | Physical delivery |
| Soybeans | ZS | 5,000 bushels | $0.0025 per bushel | $12.50 | Physical delivery |
| Chicago wheat | ZW | 5,000 bushels | $0.0025 per bushel | $12.50 | Physical delivery |
| Arabica coffee | KC | 37,500 lbs | 0.05 cents per lb | $18.75 | Physical delivery |
GC represents 100 troy ounces of gold, while MGC represents 10 ounces. Both are deliverable contracts, although most active traders close or roll the position before delivery becomes relevant.
CL represents 1,000 barrels of WTI crude oil, while MCL represents 100 barrels and is financially settled. This is an important difference: MCL gives oil exposure without physical delivery, while standard CL is physically deliverable.
Corn, soybeans and wheat normally represent 5,000 bushels per standard contract. A minimum price move of a quarter cent per bushel equals $12.50 per contract.
Why trade commodity futures?
Direct exposure to the commodity
Commodity futures normally track the underlying commodity more directly than stocks in companies that produce or use the commodity.
A gold mining stock isn't affected only by the gold price. It's also affected by debt, production costs, political risk, management, labour disputes, currency and general stock market sentiment.
In the same way, an oil stock isn't the same as oil. An oil company can rise even if the oil price falls, or fall even if the oil price rises, depending on the company's own situation.
Futures give more direct exposure to the commodity price itself.
Ability to go both long and short
Futures make it just as technically simple to sell short as to buy long. This can be relevant in commodity markets because price drops can be rapid when the market shifts from fear of scarcity to expectations of better supply or weaker demand.
That doesn't mean shorting is easier or safer. Commodities can react violently to news, and the market can move fast against a short position.
Clear contract size and tick value
A futures contract has a defined size. That makes it possible to calculate risk before you enter the market.
If you trade one MCL contract and use a stop-loss of $0.70 in the oil price, the risk is:
$0.70 × 100 barrels = $70.
If you trade one CL contract with the same stop-loss, the risk is:
$0.70 × 1,000 barrels = $700.
It's the same market and the same technical idea, but a tenfold difference in dollar risk.
Commodities can complement other markets
Commodities often react to different factors than stocks and bonds. Energy is driven by physical supply and geopolitics. Agriculture is driven by weather and harvests. Gold often reacts to interest rates, the dollar and safe-haven demand.
This can offer a different kind of market opportunity than index futures or stocks. But commodities shouldn't be treated as automatic diversification. In periods of market stress, high inflation or a sharp dollar move, several markets can move together.
What drives commodity prices?
Metals: interest rates, the dollar and industry
Gold is often followed against real interest rates, the US dollar, central bank demand and geopolitical uncertainty. When rate expectations change, it can affect the opportunity cost of holding gold, since gold pays no ongoing interest.
Copper and other industrial metals often react more strongly to industrial activity, China, construction, power grids, electrification and global growth expectations.
A gold trader should therefore follow interest rates, the dollar index, US inflation figures and central bank meetings. A copper trader should also follow industrial data, Chinese demand and the trend in global stockpiles.
Oil: OPEC+, inventory data and geopolitics
WTI crude oil is affected by global demand, production, refining capacity, US inventory figures, geopolitics and decisions from OPEC+.
The EIA normally publishes its Weekly Petroleum Status Report on Wednesdays at 10:30 a.m. Eastern Time. The report contains data on US crude oil inventories, refinery operations, gasoline and oil products, among other things. It can create rapid moves in CL and MCL.
OPEC's Monthly Oil Market Report gives a monthly review of global oil demand, supply, stockpile trends and market balance. This is relevant context for swing traders and investors who follow oil over several days or weeks.
Natural gas: weather, storage and LNG
Natural gas is often among the most volatile commodity markets.
Henry Hub natural gas is affected by temperature forecasts, US storage levels, production, LNG exports, power demand and pipeline capacity. Colder winter forecasts can raise expected heating demand. Hot summer periods can raise power consumption for cooling.
The EIA normally publishes the Weekly Natural Gas Storage Report every Thursday at 10:30 a.m. Eastern Time. The report shows the trend in US natural gas storage and is a key data point for NG and MNG.
Agriculture: weather, harvests and the USDA
Corn, wheat and soybeans are strongly tied to harvests, drought, rainfall, temperature, planted area, exports, fertiliser prices and global demand.
The USDA publishes the WASDE report monthly. The report contains supply and use forecasts for wheat, rice, grains, oilseeds and cotton, among others, in the US and globally. This is one of the most important recurring reports for agricultural markets.
For an active trader, it's not enough to know whether the report is bullish or bearish. You need to assess how the figures deviate from market expectations, previous reports, the weather picture and the technical structure of the market.
Soft commodities: regional weather conditions and logistics
Coffee, cocoa, sugar and cotton often have concentrated production in specific regions. That means local conditions can have a big impact.
Coffee can be affected by frost, drought and rainfall in Brazil, Vietnam, Colombia and other producer countries. Cocoa is affected by weather and disease in West Africa, among other things. Sugar can be affected by the harvest and ethanol economics in Brazil and India.
Soft commodities can be interesting, but they often carry higher gap risk, more seasonal liquidity, and a greater gap between the US futures price and the physical situation in producer countries.
Contango, backwardation and the futures curve
A futures price isn't necessarily the same as today's spot price.
When later contract months trade higher than the nearest contract, it's called contango. This can be caused by costs related to storage, insurance, financing and availability, among other things.
When the nearest contract trades higher than later contracts, it's called backwardation. This often happens when the market is tight and buyers are willing to pay more for immediate access to the commodity.
Oil and natural gas are examples of markets where the futures curve can be especially relevant. A trader who holds positions across several contract months needs to understand that the return doesn't come only from the price move, but also from how the contract is rolled forward.
How do you choose the right commodity market?
It's rarely smart to start with all commodities at once.
| Market | Often suits | Key drivers |
|---|---|---|
| Gold / MGC | Traders who follow macro and technical levels | Interest rates, dollar, geopolitics |
| Oil / MCL | Active intraday and swing trader | EIA, OPEC+, geopolitics |
| Natural gas / MNG | Traders who follow data and weather | Weather, EIA, LNG, production |
| Corn / ZC | Traders interested in reports and seasonality | USDA, weather, exports |
| Soybeans / ZS | Traders who follow agriculture and global trade | USDA, Brazil, China |
| Wheat / ZW | Traders who follow weather and geopolitics | Harvests, exports, Black Sea |
| Coffee / KC | More experienced commodity traders | Brazil, weather, transport, storage |
For many active retail traders, MGC and MCL are the most accessible entry points into commodity futures. They give smaller exposure than the standard contracts GC and CL, while still tracking the same core markets.
Natural gas demands extra respect. MNG is smaller than NG, but the market itself can be extremely fast and news-driven.
Margin and leverage in commodity futures
Margin is the amount required to open and hold a futures position. Margin isn't a recommended risk level and isn't an indication of how much you can lose.
An example with MCL:
| Parameter | Example |
|---|---|
| Oil price | $75 per barrel |
| Contract | 1 MCL |
| Contract size | 100 barrels |
| Notional value | $7,500 |
| Stop-loss | $0.70 |
| Risk at stop | $70 |
An example with CL:
| Parameter | Example |
|---|---|
| Oil price | $75 per barrel |
| Contract | 1 CL |
| Contract size | 1,000 barrels |
| Notional value | $75,000 |
| Stop-loss | $0.70 |
| Risk at stop | $700 |
Choose the contract before the entry signal
The difference isn't technical, it's economic. That's why contract choice must come before the entry signal.
Brokers can change margin quickly when volatility rises. This often happens in natural gas, oil, agriculture and metals around reports, geopolitics or extreme weather events.
Physical delivery, settlement and rollover
This is one of the most important points for futures traders.
Some contracts are physically deliverable. Others are financially settled.
Physical delivery doesn't mean an ordinary retail trader automatically receives the commodity. Many brokers have rules requiring the customer to close the position before First Notice Day or before the last trading day.
Even so, you need to know which contract you're trading.
| Contract | Settlement type | Practical consequence |
|---|---|---|
| GC | Physical delivery | Close or roll well ahead of delivery |
| MGC | Physical delivery | Don't assume micro means cash settlement |
| CL | Physical delivery | Roll or close before the delivery period |
| MCL | Financial settlement | No physical oil delivery |
| NG | Physical delivery | Watch expiry and your broker's deadlines closely |
| MNG | Financial settlement | No physical natural gas delivery |
| ZC / ZS / ZW | Physical delivery | Roll or close well in advance |
| KC | Physical delivery | Requires attention around contract expiry |
Micro doesn't always mean cash settlement
MGC is a good example of why this matters. Even though the contract represents only 10 ounces of gold, it's still deliverable. CME states that delivery occurs through an Accumulated Certificate of Exchange, not through physical handover of a small gold bar.
Strategies for commodity futures
Trend-following trading
Trend-following trading often works well when a commodity has a clear fundamental driver.
A possible long setup in gold could be:
- Gold above VWAP and key moving averages.
- Dollar weakness or falling interest rates.
- A break above a defined resistance level.
- A retest that holds as support.
- Room to the next volume area or prior high.
A possible short setup in oil could be:
- Weak inventory figures or a weak demand narrative.
- Price below VWAP and lower highs on the 15-minute chart.
- A failed retest of prior support.
- Confirmation through volume and order flow.
Report-based trading
Commodities have several recurring reports that can create large moves:
| Market | Key reports and events |
|---|---|
| Oil | EIA, OPEC+, geopolitics |
| Natural gas | EIA storage report, weather models, LNG data |
| Grains | USDA WASDE, planting, harvest, exports |
| Gold | CPI, FOMC, US interest rates, dollar |
| Coffee | Weather reports, crop news, inventory data |
Report-based trading shouldn't be about guessing the number. A more controlled approach is to wait for the first reaction, identify the high and low after the news, and see which side the market actually accepts.
Seasonal analysis
Seasonal patterns can be relevant in commodities, but should never be used as the only trading signal.
Natural gas often has seasonal significance tied to winter heating and summer cooling. Grain markets follow the planting season, growing season and harvest. Oil is affected, among other things, by refinery season, the US driving season and weather-related disruptions.
Seasonality provides context. Price structure, risk and current market data still need to determine whether a trade is actually valid.
Mean reversion and false breakouts
Commodities can make sharp breaks on news that quickly fail.
One example could be oil breaking above yesterday's high after a bullish EIA report, but failing to hold the level. If the price falls back below the breakout level and VWAP, the market may seek back toward a prior volume area or balance.
This requires clear confirmation. Shorting because the market "has moved a lot" isn't a strategy.
Example: an MCL trade after an EIA report
| Parameter | Example |
|---|---|
| Instrument | MCL futures |
| Setup | VWAP reclaim after EIA volatility |
| Entry | $75.20 |
| Stop-loss | $74.65 |
| Target | $76.30 |
| Risk per contract | $55 |
| Potential gain per contract | $110 |
| Risk/reward ratio | 1:2 |
The MCL contract represents 100 barrels. The risk in the example is therefore:
75.20 − 74.65 = $0.55 per barrel
0.55 × 100 barrels = $55
The same trade in CL would have had $550 in risk per contract.
This shows why micro contracts can be a better tool for learning commodity markets, testing strategy and controlling risk.
Common mistakes when trading commodity futures
- Using standard contracts before you understand the dollar value of a normal market move.
- Assuming micro contracts are always financially settled.
- Holding physically deliverable contracts too close to delivery.
- Using margin as a measure of risk.
- Trading EIA, USDA or OPEC news without a defined plan.
- Ignoring currency risk as a European trader when the contract trades in USD.
- Buying straight into resistance or selling straight into support.
- Forgetting that liquidity is often best in the nearest active contract month.
- Trading agricultural markets without knowing when the USDA publishes key reports.
- Using seasonal patterns as an automatic buy or sell signal.
- Assuming gold, oil and natural gas always react the same way to the same macro news.
- Holding positions through a weekend or a report without knowing the maximum risk.
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| Term | Explanation |
|---|---|
| Commodity futures | Standardised futures contracts tied to commodities. |
| Tick | The smallest price move in a contract. |
| Tick value | The dollar value of one minimum price move. |
| Contract size | The amount of the commodity one futures contract represents. |
| Margin | The collateral requirement to open or hold a futures position. |
| Notional value | The total market value of the exposure in the contract. |
| Physical delivery | The contract can end in delivery of the underlying commodity. |
| Financial settlement | The contract closes out with a cash settlement. |
| First Notice Day | The date on which the buyer or seller in certain contracts can receive a delivery notice. |
| Rollover | Closing an expiring contract and opening the next contract month. |
| Contango | Later futures contracts trade higher than the nearest contract. |
| Backwardation | The nearest contract trades higher than later contracts. |
| Basis | The difference between the spot price and the futures price. |
| EIA | U.S. Energy Information Administration. |
| USDA | U.S. Department of Agriculture. |
| WASDE | Monthly USDA report on global and US supply and demand. |
| OPEC+ | OPEC and partner countries that coordinate part of global oil production. |
| CTA | Systematic funds that often follow trends across futures markets. |
Conclusion: commodity futures are about more than the price chart
Commodity futures give access to markets that are directly tied to the world economy. Gold reacts to interest rates, the dollar and uncertainty. Oil reacts to supply, demand and geopolitics. Natural gas reacts to weather, storage and LNG. Grains and coffee react to harvests, climate, exports and regional production conditions.
This is what makes commodities interesting. Each market has its own story, its own reports and its own risk factors.
For most European retail traders, it's sensible to start with one or two contracts, not the entire commodity universe. MGC can be a natural entry point for gold. MCL can give manageable exposure to oil. MNG can be used to learn natural gas, but requires respect for high volatility.
The most important rule is simple:
Choose the contract based on how much you can lose if the stop is hit — not based on how low the margin looks in the broker's platform.
Capital risk: Futures trading carries a high level of risk and isn't suitable for everyone. Losses can exceed deposited capital. This article is general information and not investment advice.
Sources and further reading
- CME Group: Gold futures
- CME Group: Micro Gold futures
- CME Group: WTI Crude Oil futures
- CME Group: Micro WTI Crude Oil futures
- CME Group: Henry Hub Natural Gas futures
- CME Group: Micro Henry Hub Natural Gas futures
- CME Group: Agricultural futures
- ICE: Coffee C futures
- EIA: Weekly Petroleum Status Report
- EIA: Weekly Natural Gas Storage Report
- USDA: World Agricultural Supply and Demand Estimates
- CFTC: Commitments of Traders
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Frequently asked questions about commodity futures
Short answers about contracts, reports, micro markets, delivery and futures curves.
Commodity futures are exchange-listed contracts that give exposure to the future price of commodities like gold, oil, natural gas, corn, wheat, coffee and soybeans.
A simulator is always a good first step. For live trading, MGC and MCL can be more manageable than the standard contracts GC and CL because they have a smaller contract size and lower dollar value per move.
No. Micro contracts give smaller exposure, but futures still involve leverage and market risk. Several micro contracts can quickly add up to the same exposure as one standard contract.
No. Micro WTI Crude Oil futures, MCL, are financially settled. The standard WTI contract CL is physically deliverable.
Yes. Micro Gold futures, MGC, are deliverable, even though the contract represents only 10 troy ounces of gold.
The EIA Weekly Petroleum Status Report is one of the most important recurring reports for US oil and oil products. It's normally published on Wednesdays at 10:30 a.m. Eastern Time.
The EIA Weekly Natural Gas Storage Report is the most important recurring data point for Henry Hub natural gas. It's normally published on Thursdays at 10:30 a.m. Eastern Time.
The USDA WASDE is a key monthly report that updates supply and demand forecasts for the US and globally, covering wheat, grains and oilseeds, among others.
Contango means later futures contracts trade higher than the nearest contract. This can reflect, among other things, costs of storage, financing and expected availability.
Backwardation means the nearest futures contract trades higher than later contracts. This often happens when the market values immediate access to the commodity more highly than future delivery.
No. Most retail traders close the position before delivery or settlement. But you need to know whether the contract is physically deliverable or financially settled, and follow your broker's deadlines for rollover and expiry.