Archives: 2007 July

The Commodities Futures Trading Commission was created by the United States Congress in 1974.

The purpose of the Commodity Futures Trading Commission (CFTC) is to protect market users and the public from fraud, manipulation, and abusive practices related to the sale of commodity and financial futures and options. In addition, the CFTC fosters open, competitive, and financially sound futures and option markets.

In recent years, due to the number of increasing fraudulent operations, the CFTC has also placed companies involved in the trading of foreign exchange contracts under review. The CFTC and the National Futures Association ( NFA ) have by working together brought the forex trading industry largely under control.

Before opening a commodity trading account it is a good idea to check the record of the company you are considering trading with against the records of the CFTC. If the company has a record of serious regulation and operating problems the CFTC will probably have a report on that firm that will be of interest.

By taking this one simple step prior to opening an account you may well vastly increase the odds in your favor of avoiding a fraudulent trading operation.

The following crude oil futures chart shows just how tight supplies in the oil market truly are.

As you can see oil prices surged past $76 a barrel amid growing concern that unrest in Nigeria will hit exports. Nigeria has had increasing violence in its Southern Delta oil producing region for all of this year. The kidnapping of a three-year-old British girl this week is seen as a further escalation of the violence.

Oil companies in the region have scaled back production as attacks have endangered their work force. A number of oil production workers have recently been injured or killed.

The problems in Nigeria indicate that the Mid East is not the world’s only oil hot spot. With peak oil approaching and with demand strong look for significant further increases in the price of crude oil.

The rapid industrialization of China and India continue.

While we should be happy that the living standards in these countries have been increasing we should also be aware that extreme demand pressures in the face of declining supplies will put upward price pressure on many commodities for at least the next several years and perhaps much longer.

The following is from the Daily Reckoning news letter service:

“the entire world can’t get enough copper, zinc, lumber and oil. But bringing on new production takes time. Supply can’t catch up with demand overnight. In fact, it’s going to take quite some time, especially when you throw the consumption potential of India and China (37% of the world’s population) into the mix. Consequently, commodities, the market for the essentials, will remain tight for the foreseeable future. ”

Of course, markets do not move in a straight line, especially commodity markets. However, the long side of markets like copper, lead, gold, silver, lumber, and oil should be favored for many years to come.

That means buying or adding to positions on price corrections, and looking for the bull market to continue for a long time to come.