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CL trading times inventories impact markets
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CL trading times inventories impact markets

  #1 (permalink)
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CL trading times inventories impact markets

Hello,
I tried to find out the "important" trading times of CL (I donīt trade this dirty CL that destroys our environment in every case, but other markets depend from CL). At about 3:20 PM CL slows down and the minis go their way. Anyone has an information whats going on at the exchange - or elsewhere - with CL trading?

Best
Tony

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tony2604 View Post
Hello,
I tried to find out the "important" trading times of CL (I donīt trade this dirty CL that destroys our environment in every case, but other markets depend from CL). At about 3:20 PM CL slows down and the minis go their way. Anyone has an information whats going on at the exchange - or elsewhere - with CL trading?

Best
Tony

The highest volume and volatility can be found after the New York open at 9:00 AM ET. The market is very active for about two and a half hours until 11:30 AM ET. This is the main London / New York overlap.

The New York floor session ends at 2:30 PM ET.

Both exchanges, Nymex and IPE London determine the settlement price (= official closing price) at 2:30 PM.

After 2:30 PM, all important news from Asia, Europe and the US are now factored in and volume dries up.

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You might also want to watch out for the weekly inventory numbers for oil, gas and some related products.

Currently 1530 UK BST, Wednesdays, and Natural Gas inventory numbers at the same time Thursday, (holidays excepted). Often get a pop or drop on the numbers.

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Hi FT, today was a good example of the inventory numbers having an impact, (certainly on UNG, which is the Nat Gas ETF as well as the underlying.

Worth a quick look. If i can remember where to find them I'll post a link to 'market expectations' of builds and drawdowns.

But beware, my experience in these more esoteric markets are that the price often does the complete opposite to what one might expect having read the numbers. The trading room I was in today called the Nat Gas number as bullish- and looked what happened to prices!!


Some info here-the estimates are usually in the 'quality financial press' whilst the bottom of the article has a link to the EIA site

Sorry not allowed to post links, but look at EIA and goog nat gas inventory fcasts

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What would you all consider a large number of contracts to trade CL? On ES 10, 20 or even 50 contracts is small change and not really considered a block trade. Curious what the CL equivalent block trade size might be??

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CL and minis

Hello,

thanks for all replies. Another question to the CL (I really hate this dirty CL that destroys our nature, not only now when everyone see it in the Gulf of Mexico). But it has so high impact to other markets.

Last week the CL inventories were lower and this was announced on Wednesday on forexfactory. But the price has risen already the day before!? Any idea who knows why and what before we do?

Best
Tony


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The highest volume and volatility can be found after the New York open at 9:00 AM ET. The market is very active for about two and a half hours until 11:30 AM ET. This is the main London / New York overlap.

The New York floor session ends at 2:30 PM ET.

Both exchanges, Nymex and IPE London determine the settlement price (= official closing price) at 2:30 PM.

After 2:30 PM, all important news from Asia, Europe and the US are now factored in and volume dries up.


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tony2604 View Post
Hello,

thanks for all replies. Another question to the CL (I really hate this dirty CL that destroys our nature, not only now when everyone see it in the Gulf of Mexico). But it has so high impact to other markets.

Last week the CL inventories were lower and this was announced on Wednesday on forexfactory. But the price has risen already the day before!? Any idea who knows why and what before we do?

Best
Tony

(1) Oil inventories are always on Wednesday

(2) Oil does not destroy the nature, oil is part of the nature. We destroy the nature by burning too much of it, and by recovering it with inappropriate methods. The gain of exploring crude is private, the losses are mutualized. This is called moral hazard and is in no way a phenomenon limited to the oil industry.

(3) The oil price has not risen the day before, actually oil prices dropped on Tuesday by about 2.3%. The main reason for the drop in oil prices was a rise in the US-$ Index (futures symbol DX) . Oil is quoted in US-$, so when the US-$ rises, mechanically the oil price falls. There is a negative correlation between the two, which means that to some extent they mirror each other.

(4) Below there is a chart of CL and DX for last week. You can see that inventories had a lower impact on price than the US-$. Inventories only reflect the current supply situation in the US. This should have a stronger impact on the front month contract than the back months. This is particularly true a few days prior to expiration, so impact of inventories should be higher in mid-month than after the rollover date. Oil futures are deliverable, so sometimes low inventories can produce a short squeeze, as market participants rush to purchase physical supplies.

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Last edited by Fat Tails; August 6th, 2010 at 01:00 PM.
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1) I know
2) Of course. What else could it mean;-)
3) I wrote last week, I meant current week - I should sleep more than 4 hours;-).
Tuesday prices have risen, then correction to prepare for the logical reaction to inventories. After the "correct" reaction to inventories we came back to the price-level of Tuesday 10:15 EST.
The question is: a.) US$ follows CL or b.) CL reacts to US$? I mean a.) as CL is not only used in US but also in China, Japan. You watch EUR/JPY and compare with CL? EUR/JPY is highly influenced by CL price.

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tony2604 View Post
1) The question is: a.) US$ follows CL or b.) CL reacts to US$? I mean a.) as CL is not only used in US but also in China, Japan. You watch EUR/JPY and compare with CL? EUR/JPY is highly influenced by CL price.

The likely answer is b.). Why should the US-$ follow CL? Economic releases, interest rate policy, capital flows and risk aversion have a larger impact on the US-$ than any raw materials.

The reason that DX influences the price of crude has nothing to do with the consumption of crude. The reason is purely technical. The oil futures are quoted in US-$, so if the US-$ rises, this would induce a hidden increase in the price of crude. The market compensates for this, as if the price of crude were calculated against a basket of currencies, which includes other major currencies as well.

To understand this, here an example: Let us assume

- that CL peacefully trades at 82.50
- and that suddenly DX rises by 1% from 80.00 to 80.80

What would be the technical impact on crude prices?

I assume that crude price does not change against a representative basket of currencies. So first I need to check what the world crude imports are. The source is here:

International Energy Statistics

The US accounts for roughly 23% of the world crude oil imports. I would need to add the imports of all those countries with a currency pegged to the US-$. Around 42% of imports are not pegged to the US-$, as they can be attributed to Europe, Japan and South Korea. The rest is difficult to track. So let as assume for simplicity reasons that the US-$ has a weight of 41% in a representative currency basket. I can then use the SDRs (special drawing rights) and assume that the crude price did not change, when quoted in SDRs.

Note: 1 SDR = 0.632 USD + 0.4100 EUR + 18.4 JPY + 0.0903 GBP. If I enter yesterday's closings prices into this equation, the US-$ share of the SDRs is 41%. A rule of three (approximation allowed for small changes) shows that the value of the SDR remains stable, if the value of the US-$ rises by 0.59% and the value of the other currencies falls by 0.41% against the SDR.

If I further assume that the price of crude quoted in SDRs is not affected by the exchange relations between the world currencies, a 1% rise in DX should lead to a 0.59% drop in crude oil price, when quoted in US-$.

This is a purely technical reaction that has nothing to do with supply and demand of crude oil. If crude oil would be quoted in Euro or Yen, this technical reaction would be different.

Hope it is clear now, that the DX has an impact on crude for technical reasons, but not vice-versa. So you can use DX to trade CL, but not CL to trade DX.

If you talk about the impact of CL on the EURJPY cross, the correlation is more often positive (higher dependancy of Japan on crude imports) than negative, but it is mixed, see chart below.

Attached Thumbnails
CL trading times inventories impact markets-eurjpy-120-min-_-cl-09-10-120-min-06_08_2010.jpg  

Last edited by Fat Tails; August 7th, 2010 at 01:06 PM.
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