October 4 - Leonardo Siligato
A quick start guide to company reports that will show you the key indicators to zero in on; where to find them; and most importantly, how to interpret them.
If you’re investing in oil, there are some key oil price indicators you should pay attention to. Nobody has a crystal ball when it comes to the oil markets. But armed with the right data and stats, you’ll be able to better understand future movements in oil prices. So here are the most important things you should look at as an oil trader:
1. OPEC: The Organization of the Petroleum Exporting Countries is one of the world’s biggest cartels. Its main goal is to protect prices for its product, a substance all of humankind is addicted to. OPEC controls nearly half of global oil production and 80% of oil reserves. Despite constant infighting, any moves it makes still carry clout. So do keep tabs on when the oil cartel meets and the decisions they make, as this can impact prices.
2. Political stability in oil-producing nations: The price of oil is quite sensitive to political and economic developments. Ironically, much of the world’s oil is located in countries that are anything but stable. They’re barely places you would send your mother alone on vacation to. Think Venezuela, Iraq, Kuwait, Iran. Geopolitical crises like wars and political upheaval in these regions can disrupt oil supply. Or at least trigger uncertainty about future supply, which can lead to short-term volatility in prices.
3. Oil reserves in the US: Every Wednesday, the EIA (Energy Information Administration) publishes data on the inventory of oil stored in the US. You know how your local bakery offers half-price loaves if it has too much unsold bread on its shelves? Same goes for oil. If the size of the US inventory increases with time, it’s a clear sign that production’s outstripping demand. This would then result in lower prices. The opposite happens when inventories decrease.
4. GDP of major oil importers: Another barometer is the economic performance of countries with a voracious appetite for oil, like China or India. One way to gauge the health of an economy is through its Gross Domestic Product, or GDP. It refers to the value of all goods and services produced in a country. Oil investors like to keep an eye on the GDP of China since it’s the world’s fastest-growing economy. Any signs of an economic slowdown may lead to lower oil demand and thus, prices. Yep, just like in a game of dominoes, one can make the rest topple.
5. Weather patterns: Bad weather can disrupt not only your vacation plans, but also oil supply and demand. For example, in the United States, the hurricane season runs from June to November. In 2005, Hurricane Katrina severely damaged oil refineries in the Gulf of Mexico and the resulting power outages caused distribution problems. Extreme weather conditions also have an impact on demand, since it changes how people use gas and oil. A very cold winter means people would need more heating oil to keep their homes warm and toasty.
6. US driving season: Two words: Road. Trips. It’s the period that kicks off on Memorial Day in late May and ends on Labor Day in September. That’s when many American families decide to hit the road in their gas-guzzling vehicles. As fuel consumption goes up significantly during this season, this obviously drives up oil prices as well.
6 ½. IEA Global Electric Vehicle Outlook: The Paris-based International Energy Agency releases this report annually. It gives you a sense of just how fast electric vehicles are growing worldwide. Along with how much of a threat they pose to oil prices. But currently, electric cars represent a tiny fraction of all the autos on the road… So it’ll still be some time before the oil market has an existential crisis!’
June 15 - Leonardo Siligato
Thinking about getting into oil trading? Here's why and how you should invest in oil, along with all the factors that affect the price of oil!