Hello all,

Every day I follow the price of oil, here at home and abroad, WTI & Brent through various futures and options contracts as well as ETFs.

What data and sources are hedge funds looking at daily to determine their decision making on oil futures for the day? I google oil futures under news every day to get a recap at the end of the day, but am not really sure where they are getting their sources from, and I feel like by the time I read it at the end of the day it's already old news.

Any insight would help, thanks!

Oil is an inside job. The world burns 90ish million barrels per day so it all comes down to supply and demand. Normal daily fluctuations are happening from the guys very closest to these supply and demand dynamics and unless you are inside that business you won't know about what exactly is going on. Bigger moves off of bigger news are more known by the masses. All that said the energy markets trade very true to technicals but we can't talk about that kind of thing here

When I traded oil futures primarily it was all the macro econ data and oil supply/demand data from dismalscientist.com and inventory reports as they get to Bloomberg.

Day to day it was 90+% technicals though. But supplemented by industry reports (which are almost self-fulfilling) on what producers' marginal costs are.

i suspect people dealing in the physical product are probably keeping tabs on the basis flow, refinery stuff, crack spreads, etc etc. all of which you can access on a bloomberg terminal.

but as far as decision making insofar as speculation, good ****ing luck. you can garner some stuff from API/DOE report price movement but on longer timeframes oil is a sloppy choppy **** show.

maybe once in my 5 years of trading have i seen a legit longterm move come from an obvious fundamental news play (the thanksgiving opec massacre of 2014).

i havea few friends that cover oil and gas or run funds. Theres a lot of information available to them and a lot of information shared among the community. I think its a bad idea to try an be an outsider investor in that industry. same for mining.

you can do quite well with a sound understanding of macroeconomics but tracking / trading small blips of supply demand and sentiment changes might be a bit ambitous. theres better areas. I for one wont touch oil / gas or mining at all.

Simple question: who are your counterparties and why do you have an edge on them?

To me this is sitting at a table full of sharks. Sure there will be fluctuations and they might look winnable but how do you have an edge in the long run? Explain to me how the average oil trader is stupider, slower, less experienced, and has less information than you do? If you can't then wtf are you doing?

To be fair, he might have charts.

I disagree with all the previous posters, i think the oil markets are very beatable, even if youre not an insider. You need a good understanding of macroeconomics though

What's your thesis as to why? Are you essentially front running large position holders and takers? How often will your trades have an edge? Weekly? Monthly?

Yes, front running the big players is part of it. My trades have an edge every time.

And it's your opinion that this is large enough to overcome the massive information and speed disadvantage you have?

Oil transport ships are tracked and analyzed, including predictions for weather. Well output data is obtained. Longer term, infrastructure spending is known. Demand is tracked and forecast. Most of the time you're paying fees AND you're trading against faster, more knowledgable counterparties than yourself. That's a big hurdle to start behind on. The only area I could image you have an edge is on surprise news where the market takes time to rebalance to where it wants to be (the front running argument).
The question was, how often do these opportunities for trades with an edge come up?

This is always a good question to ask but remember that last summer Pierre Andurand predicted that Brent was going to $100/barrel (or higher lol) by the end of 2018 and put a few billion behind that position. I assume quite a few retail donks took the other side of that bet and did ok.

i think OP can do well trading oil etfs in small size....... after all, it's not the same as trading oil stocks at fidelity or goldman sachs. yes, they have better everything than OP but they also are a million times the size in trading.

i think inventories is one of the very big things people watch.

basically, you have OPEC cutting, some nefarious nations cutting back on supply, economic growth slow and THEN THE BIG ONE, seemingly always surging when oil prices rally for an extended period.

i believe that the big recent positive rally has to do with giant pipeline bottlenecks from the permian...... but apparently that will be alleviated in 2020. so probably weak prices again.

a colleague of mine who was very knowledgable on oil used to look at gulf coast refinery stats but i'm not sure which ones or how he interpreted them.

one thing you always have to keep in mind is that spot price is headline news but it doesn't have a near-perfect correlation to future oil prices a few years out. and generally very few oil companies sell alot of oil spot. so they probably trade much more on future prices..... to some degree, spot prices pivot around futures prices..........

i should have added that i wouldn't trade oil anything day to day. i would trade based on things like moving averages. so intermediate term at least.. and then you really aren't competing with sophisticated players with better hour-to-hour info.

With solid macro you can trade anything with 6 month horizon. if day to day you probably are at an informational disadvantage, but if your a technical trader then perhaps you can come out ahead while knowing very little about the industry.

Theres lots of ways to come out ahead...I have a friend who runs a bond fund that doesn't care about interest rates. Thats unheard of in that industry, but If you pick the factor you want to bet on and ignore the rest you can be an expert in something rather than average at everything else.

you can find all kinds of historical analysis that will show you all the indicators to watch..

the 2 new dynamics out there are:\

1) USA fracking production exploding any time oil has a major move upwards.

2) oil use slowly declining over time........ my own opinion was that this was overstated but i'm thinking it's picking up some momentum.

i don't consider things like iran and venezuela being new dynamics. those "types of issues" have been around the entire history of oil.. but definitely things to watch

and i don't consider emerging market demand as new either.

like others said, the longer your time period the less you compete with better info and still have the advantage of a millionth the size of these large players. might not be a millionth but you get the idea.

US fracking (and deep sea drilling elsewhere) has definitely changed dynamics of oil. Advances in technology have basically put a price ceiling (that takes a while to kick in) on the oil market. Natural gas also imposes two ceiling levels (I don't know where they are now) with pipelines and LNG tech making gas increasingly competitive with oil.

The ceilings seem to keep going lower as tech develops. A lot of people say it will get harder and harder to drill but so far, tech seems to be outpacing the increases in difficulty, albeit slowly.

I think people generally overstate the effect of emerging markets on demand. Oil demand is actually very steady year to year, almost never changing by more than a couple % a year. To the extent emerging markets add to demand, it is nothing compared to the amount of oil/gas that's being added to reserves every year. It's really not a secret that every major player basically has a depth chart of reserves that they can dig into at certain costs. Nowadays, that depth chart is really deep, like unfathomably deep. Depending on whose numbers you use, we're looking at decades (think 5+ decades) or centuries of oil and gas available via current technology at ~$100 a barrel and definitely decades at ~$80.

There is zero question at all that we got enough fossil fuels to last for generations. The question is whether we want to keep using fossil fuels.