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5 Information Sources Oil Traders Rely On To Make Better Market Decisions

By Ellen R. Wald, Ph.D.CommoditiesAug 22, 2019 07:09AM ET
www.investing.com/analysis/5-information-sources-oil-traders-rely-on-to-make-better-market-decisions-200457414
5 Information Sources Oil Traders Rely On To Make Better Market Decisions
By Ellen R. Wald, Ph.D.   |  Aug 22, 2019 07:09AM ET
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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.

1. Current Fundamental Data

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.

Yesterday, for example, the EIA report showed a build in gasoline supplies. This immediately pushed WTI down.

WTI 15 Minute Chart
WTI 15 Minute Chart

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.

2. Expert Commodity Analysts

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.

3. Opinions From Respected Trading Colleagues

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.

4. Third Party Reports That Highlight Trends

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.

5. Geopolitics And News That Effect Production And Transportation

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.

5 Information Sources Oil Traders Rely On To Make Better Market Decisions
 
5 Information Sources Oil Traders Rely On To Make Better Market Decisions

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Clearance Beeks
Clearance Beeks Aug 22, 2019 7:48PM ET
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Supply and demand, Us stock pile at lowest levels of the year. The earth holds a finite amount of oil. Hydraulic fracturing is creating high levels of methane releases that is warming the planet. Have a nice day.
George Steven
George Steven Aug 22, 2019 3:38PM ET
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Tracking Currency pairs USDCAD CADJPY
Raji Abi Rached
Raji Abi Rached Aug 22, 2019 11:29AM ET
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Yesterday the EIA showed a built in gasoline supplies and at the same time the oil inventories were up by -2.7M isn’t confusing to go on a short term trade? Do u think the previous daily uptrend priced in the wti?
Dino Casseli
Dino Casseli Aug 22, 2019 11:25AM ET
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67 million barrels of oil out of 437.8 in the US storage is due to the unexplained EIA adjustments, why would anyone invest in the oil markets???
Abdussalam Ismail
Abdussalam Ismail Aug 22, 2019 11:25AM ET
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hello mr good evening how are you doing how work
KAMAL AHMED
KAMAL AHMED Aug 22, 2019 11:03AM ET
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Amazing crude market.....heavy draw dawn and bearish trend(reverse gear). Unpredictable mood and multitude of unknown factors beyond reach of majority traders.
Michel Simard
Michel Simard Aug 22, 2019 11:01AM ET
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Oil is regarded as unimportant because of the usa fracker flooding the market.. but it will end and balance it self. 100milllion barel a day of consumption is colosal and the technologie as a long way to go to replace that sum of energy.. There is oil in the poles and else were.. the technologie that need more attention now is antipolution system...
Ellen R. Wald, Ph.D.
Ellen R. Wald, Ph.D. Aug 22, 2019 11:01AM ET
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Yes! Sentiment about US Frackers is definitely pushing the price down. Even when the global production numbers are down, say from OPEC, there is little reaction from the market because sentiment is focused on the shale boom.
Josef Derzavich
Josef Derzavich Aug 22, 2019 10:33AM ET
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the oil market is guided by lies mostly, americans believe that the iranian and venezuelan sanctions are doing something,,,,,but turkey singapore france and many others are trading with them
Rossanna Carolina Demonte Garcia
Rossanna Carolina Demonte Garcia Aug 22, 2019 10:03AM ET
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I went long because of the EIA report about the drawdown on stockpiles in the US which was important but didnt have any impact, so how would you prioratize the data, ? Given that gasoline supply impacted more than the whole reserve in wti...
Ellen R. Wald, Ph.D.
Ellen R. Wald, Ph.D. Aug 22, 2019 10:03AM ET
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That’s a really good question. I’d say that these days (the last few months) the numbers seem to have little impact on the market unless it tells them something about a potential recession or the future of US-China trade relations. The whole market is being driven by these fears.
collins kabali
collins kabali Aug 22, 2019 9:55AM ET
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very informative. Thanks!
Mike Ross
Mike Ross Aug 22, 2019 9:48AM ET
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Sorry, I didn't find any useful information in this write-up. It's all common sense.
Sukumaran Nair
Sukumaran Nair Aug 22, 2019 8:42AM ET
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Thanks, Good intitiative
Timochin Khan
Timochin Khan Aug 22, 2019 8:11AM ET
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Excellent as always...Thank you Ellen...
 
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