Hi guys,
wondering if anyone here with first or second hand knowledge can comment on what historical data is typically used for fundamental oil (crude, products) market analysis. Are the major public sources of information reliable (reporting agencies like Platts, governmental agencies like EIA, news/market data sources like Bloomberg)? Does proprietary historical data make a noticeable difference to your view on the market? For example, would the historical data that Shell has from its physical activities give a Shell analyst a leg up on an analyst at a firm with less or no physical presence? Or is the amount of in-house data that a Shell have so small compared to the breadth and depth of data in the market that its impact is only marginal on the insights it provides? I'm asking specifically about historical because I assume that when it comes to current data e.g. who is planning to ship what type of product where, the presence in the physical market is key and news sources don't deal with that kind of info (correct me if I'm wrong). What have you seen at different firms?
For the most part, public data can do the trick for historical analysis. Problem is some sources are more accessible within the industry and can be expensive. For instance, there are a ton of different grades which might not show up in the public domain, so if you are doing pricing analysis there are a ton of things you might not see that could be interesting. So doing something related to pricing or specific to those grades, it would require you to work at a firm who has access to that industry info. Supply and demand data is pretty broadly available though. If you are looking at US markets, EIA is a good place to start, it has tremendous value if you use it correctly.
Thanks @"globalmacro"! I was thinking about analysis from the perspective of someone who joins a firm, where the cost of getting that data would not be directly shouldered by an analyst. Can you (and any future respondents) give us an idea of what type of firm your observation mostly relates to (hedge fund, physical shop, bank, financial trading, physical trading)? I also didn't specify, but I'm more curious about data for things like general supply/demand, regional flows like imports exports, inputs and outputs of refineries, refinery utilisation, storage utilisation and capacity rather than price which I think would be readily available if you're in the market and willing to pay up. Basically, I'm trying to figure out whether big firms with years or decades of experience and a large presence in the physical market have an advantage over others when it comes to getting their hands on historical data. And if not, what info does everyone tend to use?
There's a bunch of useful resources out there. EIA is great, the UN also has an import/export database that I forgot the name of. The latter is just an incredible resource that most don't even know is available. Also, if you only need the data for one thing, you could do free trials from the major industry specialists since a lot of them offer that. I used all of the above to completely reshape my analyst's market models last summer when I worked in ER. Pricing is typically harder to get than quantities, but it is often possible to backtrack the numbers if you don't wanna pay for it...
I think if you're trying to forecast the price of oil, fundamentals are probably not the way to go. I have heard over and over that fundamentals will get you killed from a lot of different people. It's interesting to watch crude when the number comes out at 10:30 on Wednesdays. That being said, as the guy above said, the EIA has a ton of info. Oil and Gas Journal is a nice place to look. Platts/Argus has more info but you have to pay for it. I think technicals are a better bet
Thanks for the responses @"jargon223" and @"wegian". I think it has been established that these data sources which you have mentioned are rich in information. Can anyone comment on whether it is generally accepted that these public data sources and the publications you can purchase out there beyond having extensive amounts of information are actually reliable sources of info within oil trading? I'm asking because it is one thing to report all sorts of information and it's another to actually reflect reality with information. Are these sources of data as accurate as it gets or can a firm with its own oil trading/refining/shipping/storage business get more accurate historical numbers through what they see from their operations. I know that there is the whole technical analysis aspect of forecasting but I assume that that comes from largely from price data which I believe is available to everyone actively involved in the oil trading business through brokers and reporting agencies, as long as they are willing to pay for it.
dude, EIA is legit.
"Are these sources of data as accurate as it gets or can a firm with its own oil trading/refining/shipping/storage business get more accurate historical numbers through what they see from their operations."
There are actual consulting firms I've heard which try to assess what companies do storage-wise and hedging, etc. There are also some other numbers you might want to look at like the American Petroleum Institute,etc, but realize API and the other groups a lot of times are totally wrong once the number comes out for storage on Wednesdays. I think it's more important to assess people's perception of the fundamentals rather than the actual fundamentals. But again, just my two cents. And yes, everybody has access to the technical analysis aspect, but I'm telling you, I highly doubt you're going to have a real, solid edge by looking into numbers like you want.
EIA is a great resource and it is the generally 'accepted' number in terms of historicals. Shops don't generally try to get 'better' info than say EIA type database (since everyone mostly accepts EIA data and it's free). What firms look at is trying to get an edge before the official numbers come out. So you get data providers that try and figure out storage levels, transportation flows, and those sorts of things so firms can pay up and develop a supply/demand view before the official numbers come out. This helps with trading
Another thing is let's say your company is starting to do business with another company or country or heading into a new region they don't know much about. Well you can use all that historical info and start putting a picture together before heading into your meetings. That helps with strategy
And if you can take that fundamental data and overlay price information on top of that, you can piece together some interesting views. Then you overlay whatever internal knowledge your firm has and you develop as complete a picture as possible...
But let's say you are looking for supply data for other countries that don't have great data gathering themselves. Then you might pay up for a research provider who estimates those numbers and spends all their time trying to figure that out.
So you can see that on the simplest level, everyone has access to similar data which is sort of the base level. On the most complex level it's impossible to piece together the same picture as someone who works in the firm because they have additional data, resources, and intel within the industry.
Fundamentals do matter for trading, but it doesn't dictate trading. It's part of the overall picture.
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Thanks for the input. @"jargon223" you touched on something which I am trying to understand but probably didn't spell out clearly when you mentioned perceptions. One of the reasons I am asking what historical data is used is because I want to get a sense of what the big players in the market look at to get their insights on historic trends/correlations on fundamentals. Or put differently, what information do the most respected market analysts in oil trading have available to them? @"globalmacro" thanks for the detailed response which suggests that everyone starts with the free public data and fills in the gaps with less transparent markets with more costly, specialist third-party data. Am I right to assume then that proprietary in-house data doesn't play a major role in looking at the historic evolution of the market and that the valuable in-house data only comes into play when you start looking at current market developments e.g. who is about to ship what product where?
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