Every wednesday, unless there is a holiday, the Department of Energy (DOE) releases its Petroleum Inventory numbers. The numbers include numbers for a few types of energy products including Crude Oil, Distillates and Gasoline. There is also an Refinery Utilization figure which comes out. All 3 of the main components of the energy complex came out with a draw down, this follows the draw seen on the API Petroleum figures given yesterday a half hour after the New York stock market close. It was not such a large draw as the API, but this report is more important, especially when all the components accross the complex come out in the same direction. This time Crude had the biggest draw, at -4.27 million, followed by distillates at -2.97 Mil and Gasoline coming in at -0.9 Mil below the average estimate of all analysts. Generally anything over 2-3 million is sufficient, depending on market dynamics and variations across the complex.
*DOE CRUDE: -3.27M V +1ME; GASOLINE: -1.9M V -1ME; DISTILLATE: -4.97M V -2ME; UTILIZATION: 82.4% V 82.1%E
- Distillate demand +290K bpd to 4.39M bpd
- Gasoline demand +40K bpd at 9.06M bpd
The front-month Crude Oil Future initially jumped about 35-40 ticks in the first few seconds of the release, this is actually quite a tame move as a deviation of over 4 million can move Crude over 100 ticks. Amazing a news spike trade using the autoclick got a fill in the market at 86.71 and knowing the extreme volatility of this report it is sometimes best to take profit when a decent amount is seen, it is also good to have some sort of automated script to take profit and move up the stop loss for the trader, especially in these fast moving markets seen after highly anticipated news releases. There then extended a further 15 ticks above the $87 level before retracing back to the 61% of the initial spike. There was some technical difficulty with the price feed after the release, but looking at this the trader will notice that there were in fact 2 tests of this 61% level, with the 2nd test going a bit lower than the first. This may have scared some traders out and it shows the importance of sticking to the original stop loss as sometimes just as we think we know the market will do something it then turns around and does the opposite of what we thought it looked like it was going to do.....does that make sense? Hmmm perhaps the market price moves are trying to make themselves look like they are about to do something so it gets us traders involved with them...the basic function of markets...but this is going on a tangent. Eventually price reached the 161% extension of the initial spike move, there was however a another pullback along the way. Normally this news can be very volatile so as soon as a trader is up 10-15 ticks they should look to take partial profits and/or at least move their stop loss to breakeven. However how many of these afterspikes are showing these perfect 50-78% pullback and then retesting highs or even going for the further fix extensions? Seems like many right now....certainly the going is sweet for forex news afterspike trading.
Also included are 2 other charts: Heating Oil Futures and RBOB Unleaded Gasoline Futures. Heating Oil is a distillate and RBOB is Gasoline...you will notice that the spike on RBOB Unleaded Gasoline was smaller than Crude and Heating Oil, and it makes sense since the draw on Gasoline was smaller than the draw down seen on Crude or Distillates.
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