High Impact Events Trading... Energy Edition

EIA Weekly Petroleum Data - Sept 11th Preview

1. Crude Oil Inventories
2. Distillate Inventories
3. Gasoline Inventories

Forecasts

1. Crude oil inventories is expected to show a draw for the fourth consecutive week, around -2.7M.
2. Distillates inventories could go either way. Forecasts are calling for a small draw of -0.1M.
3. Gasoline inventories is expected to show a draw of roughly -0.9M.

Notes

In our recent previews we have observed that any inventory data showing larger than expected draws have limited upside compared to the moves in crude when the data shows smaller than expected draws or inventory builds. The API data earlier showed a much larger than expected draw in crude stocks. Consistent with recent impacts from inventory data (EIA and API) the move was smaller than expected considering the surprise.

Last week's impact (prior impacts in earlier posts)

Again, a surprise draw triggered a spike but with no follow through, as you might expect with a deviation as large as it was.

Overview

This data always has the potential to trigger large moves in oil. However, recently we've seen that the risk associated with this event is in a surprise build, or possibly a lower than expected draw. In that scenario, crude prices will drop. The extent of the decline in prices depends on the deviation from forecasts. Remember all three inventory numbers have the potential to trigger high impact moves across crude, heating oil, and gasoline.

I'd recommend monitoring for any inventory that could send crude prices lower. With the recent gains, it could be over extended. Data that triggers selling could have significant follow through. The safest play is probably waiting until a trend or sentiment emerges. Avoid any knee-jerk reactions.

As always, caution is advised.

ECB Meeting - September Preview - This event poses risk to most asset classes. Be ready and be careful! Good luck!

FOMC Meeting - September Preview

1. FOMC Economic Projections
2. FOMC Statement
3. Federal Funds Rate
4. FOMC Press Conference

Rate expectations

This will change leading up to the FOMC meeting. You can check it here: CME FedWatch Tool. The market is split on what the Fed's action on rates will be.

Forecasts

1. Bloomberg surveyed 100 economists. 95 of them are predicting the 25bp cut. Five economists are calling for the Fed to hold rates steady.
2. Reuters polled 120. 110 are predicting the 25bp cut. Ten are calling for unchanged.

Notes

Inflation pressures caused by a 14% rise in oil prices is the main reason behind the changing rate expectations. Since last week, the market went from a 5% chance of holding rates steady, to currently a probability of 36.5% the Fed keeps rates on hold.

Fed Funds Rate

The market is expecting the Fed to deliver a 25 basis point cut.

Fed Statement

No major changes in language are expected from June's statement when the Fed said they will 'act as appropriate' to sustain the expansion.

Economic Projections

There will be a drastic change in this report. In addition to the latest projections on GDP growth, unemployment, and inflation, we will also see the Fed's new dot plot, which will tell us where members see interest rates by end of year 2019 thru 2021. Last time the Fed released the dot plot was in June, prior the the July rate cut. At that time, the Fed indicated no rate movement by the end of 2019, one rate cut in 2020, and a rate hike in 2021. Major changes can certainly trigger market moves. The most likely scenario involves two further rate cuts by the end of the year, to a target range of 1.50%-1.75%.

FOMC Press Conference

Powell will have to justify (assuming a rate cut) why the Fed is lowering rates amid an improving economy and stock market indexes near record highs. Most of the drama could be in this press conference. Unlike his predecessors, Powell has a history of saying things that surprise the markets. Last October he triggered some market turbulence when he said, amid a series of rate increases, the Fed was 'a long way' from neutral rate, indicating more hikes were coming. Then in December, he said the Fed's balance sheet reduction program was on autopilot. Yet again, last meeting he caught markets off-guard when he called the rate cut part of the 'mid-cycle adjustment.' While it's not his strategy, Powell is earning a reputation for putting his foot in his mouth during post-meeting pressers. To us traders, it means be ready for the volatility he will provide.

Recent Impacts (WTI Crude and Natural Gas)

The arrow is pointing to the beginning of the press conference.

June

July

What to expect

Volatility. Energy usually doesn't get impacted like other asset classes such as currencies and precious metals, but given the uncertainty the potential is there.

The uncertainty surrounding the rate cut could cause an initial knee-jerk reaction. It's the rate statement and the economic projections that will give energy markets direction. Most importantly, expect the Fed, in both the statement and the press conference, to address the oil price spike. This is going to make WTI susceptible to larger than normal moves.

As always, caution is advised. Good luck traders!

Hmm I guess I'll sit it out then. :|

The latest probabilities from the CME FetWatch Tool showing the market is about split on whether the Fed will cut tomorrow. Very surprising. Updated preview.

T-minus 10 minutes... anyone in?

I hope to have a preview up tonight for tomorrow's EIA inventory data. After the surprise build showed by the API numbers, I think there's some things to know heading into the event. Recently, we've discovered that there was more potential on oil prices falling after surprise builds or less than expected draws, this may not be the case any more. Oil prices have been supported by the threat of further attacks. Stay tuned...

I might try my hand at some gambling tomorrow if it feels right.

EIA Weekly Petroleum Data - Sept 25th Preview

1. Crude Oil Inventories
2. Distillate Inventories
3. Gasoline Inventories

Forecasts

All three are projected to show a small draw, somewhere between -0.3M and -0.6M.

Notes

In our recent previews we have observed that any inventory data showing larger than expected draws have limited upside compared to the moves in crude when the data shows smaller than expected draws or inventory builds. This might be over. At least for now. Since the Iran attack on Saudi Arabia, oil prices have seen some support. The threat of further attacks lingers and any move lower could have limited potential. I also think that a move higher on larger than expected draws will also see some limits on how much prices move. This is a strange release because the focus is really not entirely on inventories. Global oil supply is in focus and inventories could take a back seat. Even after the API report showed an unexpected build, after the initial spike down, the move was over.

Recent impact on Crude Oil CL (comparing before and after the Iran attack)

Sep 18, 2019 Even after last week's surprise build there wasn't the price drop we'd expect to see.

Sep 11, 2019 Before the attacks, with mixed inventory data, we saw a more directional reaction to the data.

Overview

It's the highest impact energy event and worth monitoring. But my advice this week is to be a spectator. There's no reason to make any attempts to trade this data when oil prices are being driven by other factors right now. Stick with whatever bias you currently have and don't let this inventory data affect it. Once the Iran threat is over, Saudi production becomes more certain, etc then this data will become more predictable in terms of what to expect in different scenarios. For now however, it's too risky. Extreme caution is advised due to the uncertainty surrounding the oil markets.

Stay safe out there!

The impact for the last two weeks has been very surprising. On today's EIA surprise crude inventory build, oil prices rallied.

This week's main events are the usual suspects. We have EIA data on Wednesday and Natty gas storage Thursday.

1. Crude Oil Inventories
2. Natural Gas Storage

The last two EIA inventory data releases I covered were quite shocking as crude oil prices rallied after surprise builds, two weeks in a row! I'd never seen that in over 20 years in the markets. I suspect it had something to do with the (at the time) recent Iran drone attacks on Saudi oil fields. Now that there's some distance between that, perhaps we'll see a more predictable reaction. We'll see.

I hope to post previews leading up to these events. I'll wait until after API data to preview EIA inventories. I'll get some charts showing recent impacts. I'll be interesting since I missed last week. I'm not sure how it reacted to the data. I'll include that in any preview.

Natty Gas storage is a tough one. It's high impact but a little more difficult to trade. Unless I see something that calls for it, I'm expecting to preview the EIA data and then taking a look at Russia's Trade Balance data to see if it's worth considering a little closer. It's been having impact recently.

I encourage feedback and posts by other members as well. Anything that we can try to understand and profit from is valuable. Open invite. Traders Only!

Good thread ET

EIA Weekly Petroleum Data - Oct 9th Preview

1. Crude Oil Inventories
2. Distillate Inventories
3. Gasoline Inventories

Important recent findings

After the Iran drone attacks on Saudi Arabia there was a major shift in how crude reacted to the EIA inventory data. We observed that for two consecutive weeks, it rallied on surprise builds. The most recent was on Sept 25th shown here. Prior to that, on the 18th, it reacted similarly shown here. It's very unusual and against basic fundamentals that crude oil rallies on an unexpected rise in inventories. Then it happened two weeks in a row. Let's take a look at what happened last week, on Oct 2nd in the next section.

Last week's impact

Last week, things returned to normal as crude dropped on a surprise build. But let's take a closer look. The 3.1M build in crude oil inventories marked the third consecutive week that the data is showing inventory builds. Here's a visual:

Crude dropped as would be expected. It dropped hard too. To me this means we've gotten back to some type of equilibrium in the oil market, and going forward the reactions should coincide with the data. Here's last week's crude oil chart at release time.

What to expect this week

Forecasts are for a build of around 2M in crude, and draws in gasoline and distillates of roughly -1M and -2M respectively. When these three inventory figures show extreme draws and builds at the same time, that's when we get whipsaws like we saw today when the API data was released. However, I'm inclined to think that crude may be sensitive to a fourth consecutive build and prices would likely drop hard if that happens. I'd be careful with large draws in the other petroleum products though, as that data can heavily impact crude as well.

To trade or not to trade

I'm advising some pretty heavy caution. However, if distillates and gasoline inventories remain relatively tame and crude oil inventories shows a significant build, there's no reason why you couldn't profit from some follow through after the initial reaction. That's the only scenario in which I could see trading this data while understanding the risk taken. Otherwise, it's never a bad decision to sit on the sidelines and observe. It should be interesting.

If any traders in here have anything to add, I encourage the feedback or input. I'd also love to hear of anybody that traded the data.

Good luck fellow traders!

This is exactly what played out today. A big whipsaw.

I'm thinking we might be trading around news headlines the remainder of the week. It's all about US-China trade spats right now. Good luck out there!

EIA Weekly Petroleum Data - Oct 17th Preview

1. Crude Oil Inventories
2. Distillate Inventories
3. Gasoline Inventories

Notes

1. Due to the US holiday on Monday, this week's EIA inventory data was moved to Thursday at 11pm.
2. API data showed a huge crude inventory build earlier, over 10M.
3. Forecasts are for a build in crude inventories of around 3M.
4. Forecasts for distillates and gasoline inventories are expected to show a draw of about 2.5M and 1.5M respectively.
5. Crude oil inventories have shown a build the past four releases, which is a pretty good signal that lower demand is the likely cause of the increases.
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Recent impact

Last week, the disparity between draws in distillates and gasoline inventories, and the inventory build in crude, caused a whipsaw.

Overview

The likely scenario is that crude will show an inventory build, along with distillates and gasoline at higher than expected draws. If that happens we'll likely see limited rise in oil prices. Downward pressures on oil may cap upside potential as well.

The risk of crude inventories showing a build is also a potential trigger, and could send oil prices lower if distillate/gasoline inventories come in close to expected or surprise the market with higher draws or builds in inventories. In this scenario, I think we'd see oil prices drop with follow through.

Here's a look at what happened to crude prices after the EIA report.

The data showed a build in cruide oil inventories, draws in distillates and gasoline.

The whipsaw that ensued after the mixed data was not a surprise. The rally afterward is what was a little surprising. Supply is clearly outpacing demand, but crude is appreciating. Dead cat bounce after recent price drops?

Any thoughts?

I think that crude just fell too hard and fast from the Saudi high. It went right through the previous 54-56 range straight down to 52 with very little pause or consolidation. Crude was due to bounce or consolidate a bit before it made it's next move.

Where do we go from here? No idea. I do find it interesting that crude is pricing in an economic downturn while equities are near record highs.

Glad to see you're back!!!

It is indeed strange, how prices rose after these numbers?

Did the lower than expected supply of gas and distillate really drive oil higher?

Whose cutting supply out there?!

Hey brother, just browser an article briefly about a tropical cyclone that may hit some oil companies on the Gulf of Mexico, does this have any effect on the current surge in oil prices across the board?


Glad to see youre around here too kind sir.....

I'm thinking that could have been the reason behind today's gains in oil.