Typically, as August comes to a close, the business and investing world slows while investors and traders take summer vacation. With lower background noise from markets, it's a great time to assess trading strategies.
Here are five different information sources oil traders rely on to make decisions and design investing schemes—along with a breakdown of how they use these findings today.
Information on oil market fundamentals, such as current production and demand intelligenc, can provide a good overall picture of the oil market at a given time. Sources for this, however, are varied, with some more accurate and up-to-date than others.
For example, the U.S. Energy Information Agency (EIA) issues a weekly Petroleum Status Report with data on U.S. oil production and inventories, oil exports, oil imports and consumption. The American Petroleum Institute (API) provides a preview of this information before the EIA report is released and also provides monthly statistical reports on production, consumption and a variety of other indicators. The International Energy Agency (IEA) issues Oil Market Reports with information on oil supply and inventories for countries that are members of the IEA. OPEC issues a Monthly Oil Market Report with data on production from its members as well as demand outlooks.
The drop was a little less than 1% before the price rose again shortly after. Other important sources of information that can help in decision making about overall trends in oil demand include global economic health, manufacturing data and consumer demand numbers. For example, in the United States, AAA releases data on driving, gasoline consumption, etc.
Various banks, subscription newsletters, for example EnergyIntelligence, and forecasts in major financial publications provide access to analyses from commodity experts. Many of these will include the authors’ views on where oil prices are heading.
These commentaries can focus on short- or long-term forecasting. About 15 years ago, it became popular for long-term forecasters to speak about peak oil, meaning the world’s supply of oil was going to run out. Now it's trendy among many long-term forecasters to predict peak demand, meaning the demand for oil is poised to drop.
A network of colleagues and acquaintances who share ideas, is integral, and can provide real benefits for many traders. Of course, some traders keep their ideas to themselves, treating them like proprietary information. But others are happy to share insights, especially if there is a flow of thoughts in both directions. Some online message boards help facilitate this, especially among the huge group of independent traders, but Twitter has become an important place for traders to interact with other traders. It is up to each individual to determine who is most respected and has the best ideas.
These often provide traders with a detailed look at a particular issue that can impact the oil market in the short term, or can also provide information on ongoing trends that are good for longer term trading. For example, there are multiple companies that track the movement of oil tankers around the world. Information from these services can uncover exports that aren’t being reported elsewhere. Detailed weather reports, such as those provided by Marcus Weather, for example, can help traders assess the possibility for natural disasters or changing temperatures. For example, hurricanes in the Gulf of Mexico can impact production, and particularly high temperatures in Saudi Arabia can increase that country’s domestic oil demand. Anticipating a temporary drop in production or a temporary bottleneck in transportation from a weather event can be very useful in short-term trading.
So far this summer, for instance, weather issues have had minimal impact on oil. However, many people are watching the oil tankers leaving Iran as well as those in the Strait of Hormuz for indications of where the Iran-oil-sanctions issue is heading.
As oil becomes ever more integrated into modern life, it is increasingly being impacted by geopolitics. Traders often keep an eye on everything: from U.S.-China trade negotiations, to the crisis in Venezuela, to Iran sanctions, to the tango between Russia and OPEC, to political disputes over pipelines in Canada and the U.S., to the push for green technology and environmentally-friendly policies. All of these, and more, play a role in the movement of oil prices. At different times, different political and geopolitical issues are more determinative.
Right now, in the short-term, U.S.-China negotiations and the potential for a global recession are the most important issues. Some say that in the long-term, environmental policies will be the most important issue, though engineers and inventors must first find the technologies to replace oil.
What sources do you find most useful? How do you rank the information you use to make decisions in the oil market? And do you have any other great ideas? Please share your favorite sources of information in the comments section.
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