Active traders and active investors love crude oil. From highly liquid futures contracts like WTI crude to oil ETFs to oil company stocks, active traders and investors study crude oil's price as actively as any asset out there, which makes sense. Crude oil is a critical element in the global economy, so its ultimate price matters greatly to future economic growth or lack thereof.
Many people immediately think of gasoline prices when they think about crude oil, but a barrel of crude oil is refined into more than just gasoline. According to the Energy Information Administration (EIA) a barrel of crude oil breaks down into the following base inputs:
Heating Oil / Diesel Fuel
Jet Fuel ( kerosene)
Propane / Propylene
NGL / LRG
Residual / Heavy Fuel Oil
Asphalt / Road Oil
These inputs are then used in some 6,000 other consumer products such as Vaseline, crayons, motorcycle helmets, heart valves, candles, pillows, detergent, perfumes, purses, tennis racquets and many more.
Given how many products are influenced by the price of a barrel of crude, it is fitting that it is one of the more volatile markets due to the sheer number and frequency of regularly scheduled data releases aimed at the oil industry. The importance of each piece of data varies with the surrounding circumstances, geopolitically as well as economically. Here we go through some of the releases and rank them given the current landscape for crude oil:
1. EIA Weekly Petroleum Status Report -- This release takes the top spot for market-moving importance given the current backdrop of high U.S. supply and OPEC+ production cuts. It is a comprehensive report on supply, demand and production in the United States. Released every Wednesday at 10:30 a.m. Eastern time, it includes figures on gasoline inventories as well as refinery utilization. The data is taken and compared by traders to estimates from analysts in order to label the data as bullish or bearish. In other words, a draw of 2 million barrels may seem bullish, since inventories have declined by a large amount, but if expectations were for a 4 million barrel draw, you may see a brief selloff in crude futures. This is the "earnings report" for crude oil markets and it happens every week.
2. OPEC Monthly Oil Market Report -- This report normally would not be ranked so high, but given the recent announcement of a production cut within OPEC as well as some non-OPEC allies, the report becomes very important. It can be viewed in two ways; what does OPEC's production look like vis-a-vis the promised cuts to that same production and which way is OPEC's view of the world tilted? The OPEC report is released monthly between the 12th and the 17th of each month. The best part of this report for traders, after checking OPEC's compliance to the cuts, are the comprehensive demand estimates. When production is not constrained by an agreed-upon cut, the importance of this report drops a slot or two in our rankings.
3. Refinery Utilization -- The refinery utilization figure is under-appreciated but is critical for short-term demand estimates. This is another data set that becomes more important given the current backdrop. With the current trade tensions between the world's two largest economies (which are also number one and two in crude consumption), refinery utilization represents short-term demand at the bottleneck that is U.S. refineries. Given the OPEC cuts, demand uncertainty can drive price. Short-term, there can be a correlation between moves in refinery utilization and changes in U.S. inventory levels which can in turn, drive price.
4. International Energy Agency Oil Market Report -- The IEA, based in Paris, also releases a monthly report, often within days of the OPEC report. The report contains independent information on supply, demand, crude oil stocks, prices and refinery activity throughout the globe. It is often viewed as an unbiased report due to the country of its origin, since France is 71st in the world in oil production.
5. Baker Hughes Rig Counts -- The Baker Hughes oil services company has issued the rotary rig counts as a service to the petroleum industry since 1944. However, it only became important in the last 10 years as the U.S. moved from 5.3 million barrels per day (bpd) to the current 11.9 million bpd and the top spot in global crude production. Rig count data is viewed as a proxy for increases and decreases in production in the states, but the correlation is not solid and the late Friday release of the data (1 p.m. Eastern time) reduces its effect on price action.
There's quite a bit to take in when analyzing crude oil price moves including some things not categorized above such as the Iran and Venezuela sanctions and Russian production data, but at the end of the day, it's supply and demand. No CEO scandals, no bad earnings calls and no failed product launches. Just how much crude is available for sale and how many entities want to buy it. All the information above doesn't change that simple dynamic.
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