The NYMEX, or New York Mercantile Exchange, is now one of the most closely watched exchanges in the entire world. This is at least as far as traditional investors go. The exchange is a commodity futures exchange, and is one of the world’s largest markets for the trading of futures and commodities. Right now, it’s a very hot topic, but if you’re unfamiliar with the exchange, we’ll take a moment to fill you in.
Interestingly, the Chicago Mercantile Exchange and Chicago Board of Trade actually own the NYMEX. The NYMEX is located in Manhattan, New York City. It has offices in Boston, Washington D.C., Chicago, Tokyo, Dubai, London, and elsewhere. This global presence has helped cement the futures and commodity exchange as a world-wide leader.
The exchange is particularly well known for oil trading. Besides oil, the New York Mercantile Exchange also trades natural gas, heating oil, gasoline, platinum, electricity, coal, and various other commodities and futures based off of these commodities. While the exchange is based in New York City, it facilitates trade around the world.
So what makes this Mercantile exchange so special and why should you care? Commodities are a very hot topic right now due to the overall conditions of the global economy, and the price of certain commodities. In particular, investors and economists alike are closely watching the NYMEX oil price. This price is a widely observed indicator for global oil prices, and helps set the stage for the sale of crude around the world.
Why Investors Watch the NYMEX so closely
For investors, NYMEX oil futures offer a great way to potentially reap huge profits later on down the road. Oil is currently selling at historical lows. There’s a chance that oil could sink lower, but there is also a chance that prices could improve. If oil prices gain ground, investors who buy oil now while it is cheap could stand to reap huge profits.
Of course, the oil futures market is fraught with risk. Fact is, no one knows when oil prices will rebound, or even if they ever will. While it is likely (though not a guarantee) that oil prices will one day gain ground, prices might not rise substantially any time soon. Then again, prices could skyrocket next week if major oil producing countries announce a large supply cut, or the global economy starts to grow more rapidly.
Where there is risk, there is a potential for reward. For investors, oil futures and other oil based investment vehicles offer a great chance to produce substantial profits. Most investors prefer to have a mixture of risks in their portfolio. Crude oil offers a great way to add a high-risk, but high-reward type of investment.
Why Economists Care So Much About NYMEX Oil Prices
Investors aren’t the only ones watching the New York Mercantile Exchange. Economists are also watching the exchange very closely. That’s because commodity prices are very closely tied to the global economy. Price movements can offer great insights into the shape of the global economy, and the outlook of investors, companies, and other parties.
The NYMEX oil price, for example, offers an indicator of how oil prices are doing. NYMEX oil futures demonstrate what investors and other parties believe future prices will be. If NYMEX crude prices are low now (they are), and futures are also selling on the cheap (they are). That means that most parties believe that oil prices are going to remain low.
Given that oil futures are low right now, this means that many investors and companies likely have a relatively tepid, if not negative view on the global economy. When the global economy is struggling, demand for oil generally decreases. That certainly appears to be the case right now. It’s important to note, however, that supply could be cut, which would raise prices. Or the global economy could turn the corner, which would also put upwards pressure on prices.
There are many indicators worth watching on the NYMEX, and this is true for both economists and investors (among others). Light, sweet crude, or the NYMEX WTI as it’s called for short, is one you should pay close attention to, for example. Sweet crude is considered higher quality crude, and is frequently refined into high value added products, such as fuel.