High Impact Events Trading... Energy Edition

I think yesterday there was some news that Saudis may cut supply. Here is an article: https://oilprice.com/Energy/Energy-G...n-Further.html

I just caught this news as well! Gulf Of Mexico Oil Companies Brace For Tropical Cyclone

They haven't cut production yet, although Occidental were removing non-essential personnel in the region.

Woah. Thanks for sharing. Had not seen that.

almost on bi-weekly basis I visit this website:
https://www.eia.gov/
in their periodic reports you may find a gesture of "next event"

in particular "Analysis & Projections" subtitle

Natural gas last month gap
in-between candles have been removed.

API Weekly Statistical Bulletin - Oct 22nd Preview

1. API Weekly Statistical Bulletin

Notes

1. Last week's API report showed a massive build in crude oil inventories of over 10M.
2. Two weeks ago API reported over 4M build in crude inventories.
3. EIA and API data are both showing the inventory builds in crude as an emerging trend.
4. Forecasts again are calling for a build in the EIA data, which is about what we should expect when API inventories comes out.

Recent Impacts

Oct 16, 2019

Oct 8, 2019

Oct 1, 2019

Sep 24, 2019

Summary

This data is tough to trade because it's not disseminated like other data. There is usually a big impact on the price of oil. Another tricky aspect of this trade is that the market closes about 25 minutes after the data is known. It's best to close any positions and avoid holding over the close so that you don't expose yourself to any risk of a gap.

As displayed by the charts above, there is usually some but not much follow through after the initial reaction. What we haven't seen is a whipsaw. Unlike the EIA inventory data, the API number is less likely to lead to any whipsaws because most of the focus on the crude inventory number.

The risk is probably skewed towards a build since crude prices have been suppressed recently. With that said, a surprise showing a draw would likely have significant impact as well. I'd look for a surprise in either direction before attempting to get in on this data. Actually, it's probably best to sit the API report out.

If anybody out there decides to trade it, I'm interested to see how you did! As always, caution is advised. Good luck!!

Natural Gas Storage - Dec 5th Preview

1. Natural Gas Storage

Forecast

1. While the median forecast is around -20B, the range of estimates is wide from -5B to about -30B.

Outlook

1. As we can see by the graph below we are entering the season where consumption rises and storage depletes.
2. Early in the winter season storage data is more likely to miss forecasts as demand and supply are a lot more volatile and weather dependent.
   
   Attached Image (click to enlarge)

   
   

Recent Impacts

Nov 27

Nov 21

Nov 14

Nov 7

Summary

Volatility is always going to be expected with Natural Gas EIA data. Recent prices suggest that natural gas could have risk skewed to the upside. Follow-through or continuation from any knee-jerk reaction might be more likely in the event of a surprise draw.

If history is any indication of what to expect, then I'm looking for a number closer to -30B which would send natural gas prices higher. Not investment advice. Be careful out there!

OPEC Meetings - Preview

1. OPEC Meetings
2. OPEC-JMMC Meetings

What to expect from OPEC

1. The first meeting will be limited to OPEC members which will take place Thursday.
2. The big question is can Saudi Arabia get deeper production cuts, or will they just extend the current cuts in supply?
3. Saudi Arabia is making it clear that they want cuts. Deep cuts. Not only falling demand, but the Saudi Aramco IPO is a big reason behind the Saudi cut demands.
4. Wenesday, Iragi oil minister rocked oil prices when he said OPEC needed deeper cuts than what was previously expected (400K or more).
5. Now that cuts of 400K+ has been somewhat priced into the markets, anything less could send oil prices lower

What to expect from OPEC+

1. Friday, Russia and other non-OPEC members join in on the meeting with OPEC. Hence OPEC+.
2. Russia's Energy Minister Alexander Alexander Novak has made it publicly clear that Russia is against deeper production cuts. Most recently he's said that any cuts shouldn't be implemented until March 2020.
3. Putin, however is likely to have the last word. This gives us reason to believe that Saudi Arabia could still get the cuts from Russia.

Summary

The OPEC meetings are likely to rock oil prices. We should see oil prices appreciate if Saudi Arabia gets its way and deeper cuts are agreed to in both meetings. However, given the recent statements a likely scenario is that OPEC might undershoot by not getting deep enough cuts. This would hit oil prices especially hard in the midst of falling demand.

If OPEC agrees to cuts and the non-members aren't on board to reduce supply, then we could see a big swing Friday. But if the non-member nations agree to cuts after the OPEC meeting then oil prices could break the $60 level, easily.

This one is a risky event because there's no set time for when any announcement is made. It's going to take a lot of time watching paint dry if you plan on catching the statements when they come out. If you do though, there's some significant profit potential if played correctly. I'd advise not taking a position until the outcome is announced.

Good luck fellow traders!

API Inventory Data - Jan 14th Preview

1. API Weekly Statistical Bulletin

Recent impact on Crude (CL) (Dec 24th omitted due to market closure)

Jan 7, 2020

Dec 31, 2019

Dec 17, 2019

Dec 10, 2019

Notes

API data might have some shorter-term impact compared to the EIA inventory data, but it can still carry a hefty impact. The past three releases have shown a large draw, which is an annual trend that usually comes to an end in early to middle of January. It's usually best to see how the market reacts to the API data to get a feel for how sensitive prices could be tomorrow for the EIA data.

There is likely limited downside potential in any higher than expected inventory data, and considerable upside risk in any surprise draw. Not a data that I recommend trading because of how the data is disseminated by API, but an important one to keep our eye on nonetheless.

Great post

EIA inventory data - Jan 15th Preview

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

Why could this be important?

Looking back at the history of the data, at the end/beginning of each year there tends to be a series of consecutive draws in crude oil inventories before finally starting to build again sometime in January.

Last month there was a small surprise build of 1.2M vs an expected -3.4M draw forecast. Prior to that we saw three consecutive draws, the last of which came in way off forecasts at -11.5M vs -3.1M expected.

The question for this release is will we get another draw or will oil inventories start to ramp up again?

Recent impacts

Displayed below are recent impacts on crude oil (CME continuous) and usd/cad. The impact to usd/cad isn't always significant but worth mentioning and including in this report. Two releases were left out due to irregular release times and low liquidity conditions (Jan 3rd and Dec 27th).

Jan 8, 2020

Dec 18, 2019

Dec 11, 2019

Notes

The risk in today's release is skewed towards a surprise build. After oil experienced downward price pressures overnight, after recent gains, any surprise build could send oil prices lower. However, oil prices have been sensitive to data as of late, and any actual data deviating significantly from forecasts could send oil prices in either direction.

Good luck out there!

EIA inventory data - Jan 23rd Preview

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

Recent Impact

Last week, although crude inventories showed a draw of 2.5M, distillates and gasoline inventories showed enormous builds. Crude fell on the data.

Jan 15, 2020

Notes

As always, this data is expected to carry a hefty impact. The focus tomorrow will be on all three numbers and whether or not a draw or build is reported. Inventory data for distillates and gasoline usually don't trump crude inventories, but when they come in at such extremes such as last week, that becomes the overriding theme of the release. I'd look for all three data releases to show either a draw or a build before making any moves. If they are all in agreement we could see some serious impact. With recent declines in oil prices, the risk isn't as skewed to the downside as it has been but it still is to some degree. Although I'd expect any moves lower to be larger, there's still the potential for sizeable moves in any direction.

I never trust releases when they aren't scheduled at the normal release time. This week, due to the holiday, we'll get the EIA data a day later and 30 minutes later than the normal release time as well. I'm not sure what's not to trust, but adding another variable into an already complicated equation is always risky.

It's always best to wait for all the numbers to come and and see which ones are triggering the moves across oil, heating oil, and gasoline, then decide if an entry is worth the risk. Good luck fellow traders!

EIA inventory data - Jan 29th Preview

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

Recent Impact

Jan 23, 2020 - Last week all three inventory numbers cane in lower than expected. While crude oil inventories showed a bigger than expected draw of -0.4M vs -0.1M, it was distillate inventory that surprised the market with a draw of -1.2M vs an expected build of 1.7M.

Notes

As I detailed in the Jan 15th preview, there's an annual pattern that emerges in the inventory data, specifically crude oil inventories. There tends to be consecutive inventory builds sometime into January and it generally is followed with subsequent builds. Here's the image.

Given the recent sell off, at these relatively low levels the general price risk seems to be to the upside. The event risk however is skewed to the downside. I expect based on history to see this data starting to show builds which is bearish for oil prices. I'm not sure this is the release where it happens but it could be. If EIA reports a crude inventory build, expect prices to head lower on the data. Although keep in mind the gasoline and distillate inventory data can also impact crude. As always be cautious. Good luck!!

Nice work on the post!

It's safe to assume that the builds are the restocking of inventories while oil is "out of season". Referencing the Seasonality of the Crude vs Nat Gas relationship. Crude tends to top off in the late spring (U.S.) to mid summer thanks to the expected summer travels. Conversely, Nat Gas tends to increase going into the U.S. winter months IF the weather is expected to be cool to cold. At least that is my observation from studying Commodity Calendar Spreads.

Commodity Spreads are where the serious amounts of money are being traded. Spread trades in general for that matter. One really good reference tool for studying the action of Spread Trading is spreadcharts.com

https://spreadcharts.com/

Click on the "go to the app" button in the upper right hand corner and you will go down the rabbit hole of studying the relationships, whether they be correlated or inverse.

sjc

Thanks Coondawg71! I'll check it out.

Guys, you trading the current "situation" ? Seems many imply OIL to fall due to this "health issue"... What do you think?

At the open this week, it was reported China crude oil demand has fallen 20% due to the coronavirus. That's substantial global demand. OPEC+ is scrambling and may even move the March meeting forward into this month, sometime soon. Rumors are that OPEC, specifically Saudi Arabia is trying to get additional cuts to avoid a global oil glut. Russia will be the toughest to convince as Novak recently came out and said Russia wants to stand pat for now. It seems like as long as the uncertainty in China persists, there will be strong downward price pressures on crude oil.

API data later today, and more importantly tomorrow's EIA data will be telling.

Much tnx for this info... And yeah, also seasonality would imply FALL... It is hard to separate those two big, important components atm... Will be much clearer by end of this month... But if the price will be falling in MAR.. then we might have a serious issue but yeah, by then... god know what counter measures (dampers) can be implemented... So watching is, for now... Would be in the SHORT regardless for at least a week... then have to price-in the seasonality rebound and also we will see what the virus shows... trendwise...

With recent developments in what's going on in China and around the globe with the coronavirus, OPEC has revised down it's 2020 global demand forecasts. Although, by the time they did Crude oil prices had already priced it in. There's still significant downside risk, but the market isn't going to price it in as long as the virus infection/mortality rates don't accelerate. Recently numbers have slightly decelerated, and crude prices appreciated slightly.

What I find very interesting is how the impact of the API and EIA oil inventory data has diminished (especially API) since the coronavirus. It's the main focus of the markets right now and everything else is taking a back seat.