Crude Oil Inventories Show Lower Supply Than Forecasted; Oil, EUR, AUD, CAD Rise
Expert consensus on data released by the DOE today pegged the size of U.S. Crude Oil Inventories at 1700K but the actual number was a much lower -15K signifying a sharp drawdown in crude supplies. The dearth of supply resulted in crude oil trending significantly higher and similar upward movements in currencies with strong price correlation with Crude Oil. As you can see from the link, the currencies with the highest correlation to Crude Oil prices are the Euro with a 67% goodness of fit, the Australian Dollar with a 58%, and the Canadian Dollar with a 50% goodness of fit. These correlations are further confirmed by taking a quick look at price action following the data release.
Crude Oil’s Reaction to DOE Inventories Release
As you can see, the upward price movement in Crude was followed by upward price movements in the Euro, Aussie Dollar, and Canadian Dollar. Furthermore, the movements were generally in line with the percent correlation of prices – (Euro had the strongest reaction to the data, Aussie dollar had a more muted reaction, etc.)
It is difficult to predict Crude Oil Inventories as evidenced by the chart below which shows that there tends to be large variances between the Actual Inventory levels and the Expected levels. Therefore, it is crucial for traders to be wary of the data release, especially if they have positions in the correlated currencies, and be prepared to adjust their trades accordingly.
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