Buying Future Oil


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Buying Future Oil

Buying Future Oil

Commodity Futures Traders Hedge or Speculate

Futures hedgers and speculators have different motives and reasons for trading commodity futures. A hedger actually produces, needs, consumes or uses a commodity, while a speculator does not. The farmer who grows corn, and the distiller that buys it to produce bourbon whiskey, are hedgers. Ranchers that produce and sell cattle are hedgers, as are slaughterhouses that buy and process the animals.

Speculators participate in the futures market purely to make money. That’s why they’re called speculators. They have no interest in or intention of producing, consuming, using or taking delivery of any commodity. Speculators vastly outnumber hedgers. Although they are often maligned as greedy and parasitic, in truth it is speculators, not hedgers, who in risking their own money provide most of the stability and liquidity to the markets in which they participate (i.e., take positions).