How To Use Crude Oil Inventories In Forex Trading

U.S. Crude Oil Inventories Commodity Currency Impact

The Energy Information Administration's (EIA) Crude Oil Inventories measures the weekly change in the number of barrels of commercial crude oil held by US firms. The number of barrels basically measure the demand of oil and thus affects the price. The price of oil has also been used to have an impact on inflation.

If the crude oil inventories are more than what was expected, it shows how companies in the US are not using as much oil and therefore there is a weaker demand and a bearish crude prices. If the crude oil inventories are lower than expected it is because the US is using more oil. When analysing oil inventories you approach it in an opposite way to most data releases.

If the US is using more of its oil then it will need to supply more from global trading partners. It also suggests US companies are generating more revenue because they're using more oil for gas, travelling and production.

What does this mean for Forex traders?

Forex traders should keep an eye out on major oil exporting countries, this includes:

  • Canada (CAD)

  • Norway (NOK)

  • Russia (RUB)

  • Mexico (MXN)

As the oil inventories in the US fall you can expect appreciation in major exporters currencies, this is because the US and US companies need to buy oil from these countries.

An interesting currency pair to keep an eye on when oil inventories move is CAD/JPY and USD/JPY. This is because Canada and US are major oil exporters in the world and Japan is one of the major importers.

Remember, what Forex traders should do is aggregate suitable economic data together to get a good understanding on where the economy is headed. Are the pieces of news signalling growth in the economy or a weakness. The Logic Strategy compiles over 500 pieces of economic news through artificial intelligence and machine learning algorithms to come up with a solid conclusion on which way an economy is headed. Similar technology is used in Investment banks, hedge funds and pension funds.

To keep up to date with education, analysis and research head to our info centre.

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