I asked my colleague Mark O'Brien to contribute his opinion: To this analysis I would contend that a three-day increase in the price of [Dec.] crude oil is an insufficient sign of a price move that’s somehow counter to any longer-term seasonal pattern, nor a counter reaction to the handful of recent events you interpret as bearish: the last one or two weekly EIA reports on crude supplies, press releases related to recent OPEC meetings. In fact, larger seasonal forces may be at work. To quote a respected source, “consumption of crude oil may be greatest in the fourth quarter, but the market comes to it well prepared. Inventories are already high. But refiners in several large-producing states are subject to tax on year-end stocks. Thus, refiners spend much of the fourth quarter actually working their stocks down by maintaining their runs with those supplies and trying to postpone new purchases as long as possible preferably into the new year.” It may be worthy to put this in a larger perspective. Going back almost six months, Dec. crude oil has been trading in a ±$9.00 range between ±$51.00 and ±$60.00. Even the arguably biggest fundamental event of that time period – the September 14 attack on the state-owned Saudi Aramco oil processing facilities, which cut the country’s oil production by about half and represented about 5% of global oil production – pushed prices above that range for barely 48 hours, which was followed by ±2-week price decline of ±$10.00 all the way down to the lower levels of the price range.
This was my general interpretation. I am still learning to spread trade properly so I am trying to fill out my knowledge in how the market behaves. For example, two days ago there was a spike, the following day it dropped almost to the previous level, and today it spiked again. Historically, it seems to be behaving as expected (going back years). I suppose I had figured they'd be working down supplies earlier - but for the winter season November is still pretty early. Thanks for this!
curious - how many ticks can you get per day.... this thing moves like mad lol... maybe I should give it a go... a simple break out system should work decent..
I try to use crude fundamentals to trade energy too. I do not think recent reports (EIA) are correct and the trading shows that. The EIA is a goverment agency. The current administration wants low gasoline prices for the next election. The politization and dishonesty in government agencies is being exposed daily in the House impeachment hearings. I think a large part of the builds in crude each week are adjustments (always in one direction) that are caused by starting to count NGLs (natural gas liquids) as oil. Market I think rightly trades as if oil draws are occurring.
While Crude generally speaking will follow the equity markets - there is so much supply on the market that it has a rather bounded upside. North America has defeated OPEC's attempts at capacity caps and the world is literally awash in crude supply.
NGLs like ethane and propane and butanes are traded as separate markets and they are tracked as separate categories by the API, EIA and the DoE. Refiners will blend some grades of liquid butanes into gasoline feedstock - but that's not crude oil stores. And it is technically possible to blend certain grades of liquid pentanes into heavy crude - but it's not really done very often in the US at present because Permian Basin Crude is already on the very light side as far as refinery cracking goes. Gulf Coast refiners are actually looking for heavier stocks for blending into Permian Basin Crude and liquid pentane is a very light stock. I've got quite a bit of experience trading OTC energy swaps - NGLs are NOT deliverable into any crude oil physical futures contract or OTC crude oil swap. Completely different hydrocarbon. And the Gasoline futures contracts and the OTC Gasoline Swaps are not fungible with NGLs without blending and cracking with crude oil.
and see the other thread - shell traders post $1b profit? I mean how can you ever beat the information source they have, no matter how many times you read yahoo finance.. I don't trade oil... but I think the rules of the game are quite similar... the face value of public information has zero edge whatsoever.. might as well save the effort to even read them. like I never read AAPL earning report, but I watch the price action before/after the earnings, that's all I need to know..
I'm with SimpleMeLike and dozu888 on this one. The closest thing to fundamentals that I look at with Crude is the COT data.