Rule: 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 is holding at 106.68. On the week, oil declined 2.8%, snapping a three-week string of gains that included a 6% advance the previous week. he contract climbed above $110 a barrel Thursday on a report from an Iranian state-run broadcaster - later denied - of a pipeline explosion in Saudi Arabia
Fears of potential supply disruptions have dominated the market, and the report, however lacking in details and corroboration from other news outlets, was enough to send jittery investors into a buying frenzy.
The erroneous report was enough to swing whole markets because what mattered was the fear we had of a supply disruption in Saudi Arabia. Now that fear is removed.
Investors also weighed news President Barack Obama will speak on U.S.-Israeli relations and Iran's nuclear program in the weekend.
Obama is scheduled to meet with Israel's Prime Minister Benjamin Netanyahu on Monday at the White House.
Western sanctions on Iran to force it to discuss its nuclear program have been the main sore point in the oil world recently. Iran contends it seeks nuclear capabilities for peaceful purposes, but Western countries view it as a weapons program.
Oil should continue to settle this week although it will remain close to the 106.00 range.
Only Good News from the US:
Existing home sales US existing home sales picked up unexpectedly in January, but the previous figures were downwardly revised.
Initial jobless claims US initial jobless claims stayed unchanged in the week ending February the 18th, while the consensus was looking for an increase.
University of Michigan consumer confidence The final figure of Michigan consumer confidence for February showed a strong upward, revision from 72.5 to 75.3, while only a minor one was expected.
New home sales After increasing for four consecutive months, US new home sales dropped at the start of 2012.
Federal Reserve Chairman Bernanke testified before the Senate, this week, the markets found his comments a bit dovish and drew conclusions that any additional QA was off the table for the time being. Although the Chairman warned that the economy was recovering, he stated it was fragile and he was still worried about jobs. Gold soared on his comments.
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