Like most of you who trade oil futures I like to keep current on a host of supply-demand related data points. From active rigs counts, US weekly production totals, and demand forecasts, I read them all.
However, over the course of a career I have learned these things mean nothing if the goal is to trade for profit. I will also go as far to say thst not only are they are worthless, they are more harmful than beneficial to traders. That’s why I rarely give them any weight in trading decisions. I mean, we’re taught in business school that commodities are priced based on the supply-demand equation.
So why is the price of oil not inherently linked to how much oil we produce and use?
The data below represents peak oil price and production figures during that time:
* The week of 6/5/2015 the US produced the most barrels of oil per day in its oil producing history.
** The week of 7/4/2008 the price of oil hits an all-time high.
Conclusion
Looking at the chart above I cannot draw any linkage between what the US produces and consumes and what the price of oil is. So the next time you’re waiting patiently for the analyst-gurus to release production estimates, or make demand forecasts, think to yourself…DOES IT REALLY MATTER?