Crude Oil is considered the king of the commodities markets.
The Strategic Petroleum Reserve is the United States' emergency oil stockpile, and it is the largest emergency petroleum supply in the world. The reserve stores about 570 million barrels of crude oil in underground salt caverns at four sites along the Gulf of Mexico. Any dipping into this reserve is going to be big news.
Brent Crude is traded in London as something called Futures contracts, which are priced in US Dollars. Now, all you traders brave enough to run your positions over a period of days or weeks, pay attention here: Oil spread bets are monthly contracts. This means that: a) You don't pay any rollover charges; the bet will run until the contract ends; b) Now, get this, the spread bet runs out (contract expires) in the middle of the month before the month it says on the tin. So, for example, the Brent Crude August contract runs out (expires) on 14th July. How dumb is that?
What to watch when trading trading oil involves keeping an eye on a few different factors to the standard investment stuff. In addition to the run of the mill economic data that will gives clues as to whether the world's factories are burning more or less oil there're a couple of seasonal factors:
First, courtesy of Top Gear, there's the US Driving Season
Now switch over to the weather forecast to see how windy it is. The US Hurricane Season officially runs from 1st June to 30th November, but don't expect the forces of nature to pay too much attention to the dates. Hurricanes tend to hit the Gulf of Mexico, which is filled to the rafters with oilrigs (over 20 rigs went missing due to Hurricane Katrina in 2005).
Notice the seasonal rise in the oil price during the hurricane season.
And finally the most specific economic data to focus on are the US weekly oil and gas inventory figures, issued by the Energy Information Administration and released every week on Wednesday afternoons. If you trade oil you can't afford to miss these.
Analysis and Recommendation:
Crude Oil hit as high at 107.52 this week and is now trading at 107.22 just a bit off the top. This was a strange week, as a completely false report release by Reuters news agency, saying that President Obama and UK's Cameron had reached an agreement to release strategic oil reserves. This was completely untrue. They did have a meeting, which was long scheduled and also on the schedule was energy and oil, but no discussion were held on the release of strategic oil and no agreement had been reached. When the news was printed oil dropped within minutes to 103.88 and with the retraction returned to trade at its present level. Friday oil moved up on a week of strong data from the US. Towards the end of the day investors moved from the USD, weakening it, which allowed buyers to jump in an push oil up with low valued greenbacks.
The decline in oil prices also came as the International Energy Agency said in its monthly oil report that it expects global oil demand to grow 0.9% in 2012, as the economic backdrop and high oil prices restrain any upside momentum for consumption.
The agency projects global daily demand of 89.9 million barrels in 2012.
The report also showed that global oil supply fell 200.000 barrels a day in February, with the highest output level for OPEC since 2008 only partly offsetting a decline from non-OPEC countries.
Geopolitical concerns about potential losses related to Iran add more uncertainty for crude outlook, the agency said.
Oil should begin to fall and should continue to do so until it comes down close to 100.00. There is no data or reason to support this level.
Economic Events: (GMT)
- This Week in PetroleumRelease Schedule: Wednesday @ 1:00 p.m. EST (schedule)
- Gasoline and Diesel Fuel UpdateRelease Schedule: Monday between 4:00 and 5:00 p.m. EST (schedule)
- Weekly Petroleum Status ReportRelease Schedule: The wpsrsummary.pdf, overview.pdf, and Tables 1-14 in CSV and XLS formats, are released to the Web site after 10:30 a.m. (Eastern Time) on Wednesday. All other PDF and HTML files are released to the Web site after 1:00 p.m. (Eastern Time) on Wednesday. Appendix D is produced during the winter heating season, which extends from October through March of each year. For some weeks which include holidays, releases are delayed by one day. (schedule)
- Heating Oil & Propane Update (October-March) Heating Oil, Propane Residential and Wholesale Price DataRelease Schedule: Wednesday at 1:00 p.m. EST
- Weekly Coal ProductionRelease Schedule: Thursday by 5:00 p.m. EST
- Weekly NYMEX Coal FuturesRelease Schedule: Monday by 5:00 p.m. EST
- Coal News & MarketsRelease Schedule: Monday by 5:00 p.m. EST
- Natural Gas Weekly UpdateRelease Schedule: Thursday between 2:00 and 2:30 p.m. (Eastern Time)
- Weekly Natural Gas Storage ReportRelease Schedule: Thursday at 10:30 (Eastern Time) (schedule)
Crude Oil Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3