Commodity Analysis

Commodity query

Gurumurthy K | Updated on January 13, 2018 Published on March 12, 2017


Please give some guidelines on how to track crude oil.

Swapan Saha

Crude oil price movement is determined by various factors. The first step is keeping an eye on the production of the Organization of Petroleum Exporting Countries (OPEC).

OPEC controls about 80 per cent of the global oil inventories. Any announcement relating to the OPEC nations’ production will impact crude oil prices accordingly.

In November 2016, OPEC decided to cut production by 1.2 million barrels per day and this decision saw crude oil prices on the New York Mercantile Exchange (NYMEX) surge about 15 per cent in just four trading days from around $45 to $52. Any change in production numbers from the non-OPEC nations will also move prices.

From a trading point of view, the weekly inventory data released by the US Energy Information Administration (EIA) will be another key data to watch. This data is released every Wednesday at 8 pm IST (summer timing) and at 9 pm IST (winter timing) depending on the US daylight savings time.

Higher inventory will pull prices lower and vice versa. This data may cause huge volatility and may jerk the market like it happened recently. Crude oil prices plummeted 8 per cent then in just two trading days after the EIA reported a sharp rise in US inventory.

You can also look for the “Short-term energy outlook”, a monthly report from the EIA to track what is happening in the oil market. Similar to EIA, reports from the International Energy Agency (IEA) are also a good source of information on the possible factors that could drive oil prices.

Political unrest in the oil producing region too will have an impact on oil prices. So, watch out for any such news.

The global growth outlook given by the IMF or other institutions also has a bearing on oil prices as it indirectly hints at the demand for oil.

Lastly, as with any commodity, in general, crude oil prices are negatively correlated to the US dollar movement. But there could be exemptions. For instance, during global uncertainty due to political unrest or the like, crude oil prices could move higher along with the US dollar.

Published on March 12, 2017

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