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August 11, 2016

Trading signal 11.08.2016. Taking stock of EIA oil inventories report.

Trading signal 11.08.2016. Taking stock of EIA oil inventories report.

Hi Traders,

Today I would like to take a stock of crude inventories report released by US Energy Department on Wednesday. It’s widely known that the data from this report can signifcantly affect prices of Oil, but in my view, from recent time it has been considered very straightforward and shallow. Oil stockpiles rose – prices drop, stockpiles fell – prices go up. Plain and simple, but sometimes this approach hide other key trends which do really sets the tone on energy market.

So lets have a look how yesterday EIA account impacted on prices:

EIA report


On this 5M chart of USD/WTI  we can see that price rose but then suddenly went for a deep drop. Try to correlate it with data from EIA:

Crude EIA

Looking at “stocks” section we see that crude Oil stockpiles rose by 1.1 million barrels. But how it helps US to estimate changes in supply or demand which, in fact, main driving force on the market? Of course piling more crude in storages adds to global surplus, but it gives us no information on consumption of oil which actually reflects how demand changes.  It is better to track consumption and operable capacity of refineries which are main consumers of crude oil. As the main end product of refineries is gasoline we also need to check “gasoline stockpiles” to see changes in its consumption by us, end users.

According to EIA report crude oil refinery outputs averaged about 16.6M barrels, 255K less than the previous week, indicating capacity utlization could fell, what in turn implies less demand from refineries. But checking inputs for several previous weeks we can see that the change in last week could be normal within the normal deviation:

Crude refinery input


Meanwhile, Motor Gasoline in “Stocks” section in the table above indicates the stockpiles fell 2.8M barrels signaling the demand on fuel increased in US last week.

In overall the data came mixed but I would find it more positive than negative for US. First candle up on WTI after the release could be reaction to the report, while the drop after might be a selloff from important resistance level:



There are probably no signficant news for Oil which can put pressure on prices considering support from NZD and UK central banks in the form of monetary easing so I expect the price to head for short-term rebound back to pre-EIA report.

The signal for Oil is BUY with small lot focusing on long-term upturn.

And what’s your view on Oil? Share your analysis and suggesstions in comments so we can discuss it together!


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