What economic indicators should I be looking at if I trade oil?
Answers
2775 points
Oldman answered one year ago …
The oil index is linked to the weakness of the dollar. If the USD drops, the price of crude goes up. The relationship is about -.98 r (correlation coefficient = r) and (-) means negative. this is over the last 26 months.
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3963 points
MNSL answered one year ago …
In addition to US dollar movements, experienced traders look for Oil inventories, seasonal demand as well.
Now some analysts and intelligent investors expect lower demand for oil and some other commodities due to expected lower world growth in USA and other countries.
In a weak economy demand for some commodity definitely will come down.
951 points
Grudun answered one year ago …
There is one indicator that was missed in the other answers and that is international termoil. Look at the insurgent groups in Nigeria, the on again off again flow of oil from Iraq due to sabotage, OPEC decreasing supply, Iran making threats. All of these things are adding a premium to the price of oil. If any of these(or other) things get worse or better there can be a significant jump or drop in the price of oil because the amount of oil available on the spot market(the price that is constantly quoted) is a small percentage of global oil use so a little event can cause disproportionate price swings.
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825 points
Dragonsbane answered one year ago …
On the economic side, you should look at the EIA weekly inventory numbers. They're released every Wednesday at 10:30am EST. EIA Nat. Gas inventory build numbers are released every Thursday at 10:30 am EST and can also have an impact on the prices of both brenth and texas intermediate light sweet crude. You could also track correlations and changes in correlation between oil and highly correlated indicators. The Euro and brent have a 0.97 correlation coefficient over a 1 yr timeframe, 0.75 correlation over 10 days and 0.54 over 5 days. This will let you know when correlations are starting to break down (as this one obviously is). As a sidenote, if you are genuinely interested in trading oil, I would look more to the technical indicators than economic indicators, since the economic indicators are good at predicting long term values and not short term price movements.
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