A commodity swap is an agreement where by a floating (or market or spot) price based on an underlying commodity is exchanged for a fixed price over a specified period.

A Commodity swap is similar to a Fixed-Floating Interest rate swap. The difference is that in an Interest rate swap the floating leg is based on standard Interest rates like LIBOR, EURIBOR etc but in a commodity swap the floating leg is based on the price of underlying commodity like Oil, Sugar etc. No Commodities are exchanged during the trade.
In this swap, the user of a commodity

Commodity

In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services....

 would secure a maximum price and agree to pay a financial institution

Financial institution

In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...

 this fixed price. Then in return, the user would get payments based on the market price for the commodity involved.

On the other side, a producer wishes to fix his income and would agree to pay the market price to a financial institution, in return for receiving fixed payments for the commodity.

The vast majority of commodity swaps involve oil

Oil

An oil is any substance that is liquid at ambient temperatures and does not mix with water but may mix with other oils and organic solvents. This general definition includes vegetable oils, volatile essential oils, petrochemical oils, and synthetic oils....

.