Economic indicators are used by traders and investors trying to understand the underlying fundamentals of the market. The specific economic indicators traders look at will often depend on a market in which traders operate. For oil traders, the main focus will be on economic indicators that provide information relating to the oil industry. For the most part, the indicators used by energy traders deal with inventories and production levels of oil.
One of the most popular indicators used by traders oil reserves (reserves), which is the amount of oil currently stored for future use. This number, and what changes it undergoes, gives traders insight on trends in production and consumption of oil over a certain period of time. This measure includes all U.S. crude oil and condensate for rent (a mixture of heavy hydrocarbons and pentane) is currently being carried out in factories, pipelines and pipeline terminals.
Such information is contained in the weekly assessments,every Wednesday at 10:30 est, the energy information Administration (EIA). Energy traders will compare the number of reserve Bank expectations, along with past levels to understand the future movements in oil prices. As inventories increase over time, it is an indication that production is ahead of demand, which should lead to lower energy prices. Conversely, when reserves are reduced.
Along with the release of the oil reserves is a long list of data focused on oil production, the coverage of domestic production, refinery input, and disposal, and other inventory levels (motor gasoline), and also import/export data. All these data were taken into account when trying to get an idea about the fundamental factors of the oil market. For example, traders will look at refinery utilization to determine how much more there is potential for additional supply to the market. If you use refineries high, putting additional oil through refinery will be difficult – leads to reduced supply and higher prices.
Oil-specific economic measures are not the only area looked at the traders; they also will be used for General economic indicators, such as gross domestic product (GDP) to understand the General economic picture. If the economy is growing rapidly, it will probably consume more oil than it would be in a recession, as energy is an important factor for economic growth.
For more information on economic performance, see commodity prices and exchange rates, getting a grip on the cost of gas and what is the relationship between oil prices and inflation?