Use These ETFs To Trade Today's EIA Crude Inventories Release

|
Includes: CVX, DBO, DTO, DWTI, FXC, OIL, OLO, UCO, UGA, UHN, USL, USO, UWTI, XLE, XOM
by: FX Metrix, LLC

Summary

At 10:30 this morning (and 10:30 every Wednesday mornings except holiday weeks) the EIA releases United States crude oil inventory statistics.

Whether this report shows builds or draws in the encompassed inventory statistics - it most definitely causes a market move.

We recommend various ETFs to gain exposure to one of energy futures traders' favorites - the EIA Crude Oil Inventories release.

Background

Today at 10:30 the United States Energy Information Administration, or EIA, will release its weekly statistic detailing the changes in crude oil and refined product inventories in the United States. This is a major market moving number as a draw these days could send oil soaring upward, and a build could send oil plummeting lower. We try to help investors prepare for today's, as well as coming weeks' releases from the EIA regarding crude inventories.

Click to enlarge

Volatility Spike

When the EIA statistics are released, volatility spikes in a few different markets are undeniable, most especially in oil and refined product futures as well as commodity backed ETFs.

On the 5 day chart below, note the severe spike in crude oil volatility associated with a 10:30 announcement on Wednesday, January 20th. The CBOE Crude Oil volatility index was the highest level seen in the last week, at a level of roughly 73.

^OVX Chart

API Report Last Night

Last night, the American Petroleum Institute or API released its own version of the numbers, stating an 11.4 Million Barrel increase in inventories. This caused a significant drop in oil futures prices.

It should be noted that the accuracy of these numbers is highly debated as some weeks the two are identical and some weeks they are two totally different figures. Skepticism over the API statistics roots itself in the fact that the API is run by oil and gas companies, which at times can be biased.

ETFs to Gain Exposure

There are many ways to use ETFs to trade the release of this number, eliminating the necessity to start a futures account. Listed below are various ETFs that can be used to gain exposure to the swings coinciding with the 10:30 release.

Depending on if one expects/observes a build in inventory (net oil added to storage) or a draw in inventory (net oil decreased in storage) investors and traders alike can take their positions accordingly in the following ETFs and more. We even included a handful of leveraged options as well for those who like to add leverage to their oil trades.

Also, for those who like using options to place your bets, all ETFs listed below are also optionable with the exception of OL, UHN, DTO, DWTI, and UWTI.

Fund Name

Ticker Symbol

Build in Inventories
(+)

Draw in Inventories
(-)

United States Oil ETF

(NYSEARCA:USO)

Short

Long

iPath S&P GSCI Crude Oil Total Return ETN

(NYSEARCA:OIL)

Short

Long

PowerShares DB Oil ETF

(NYSEARCA:DBO)

Short

Long

DB Crude Oil Long ETN

(NYSEARCA:OLO)

Short

Long

United States 12 Month Oil ETF

(NYSEARCA:USL)

Short

Long

United States Gasoline ETF

(NYSEARCA:UGA)

Short

Long

United States Diesel-Heating Oil ETF

(NYSEARCA:UHN)

Short

Long

VelocityShares 3x Long Crude Oil ETN

(NYSEARCA:UWTI)

N/A

Long

ProShares Ultra Bloomberg Crude Oil ETF

(NYSEARCA:UCO)

N/A

Long

VelocityShares 3x Inverse Crude Oil ETN

(NYSEARCA:DWTI)

Long

N/A

DB Crude Oil Double Short ETN

(NYSEARCA:DTO)

Long

N/A
Energy Select Sector SPDR ETF

(NYSEARCA:XLE)

Short

Long

CurrencyShares Canadian Dollar ETF

(NYSEARCA:FXC)

Short

Long

Click to enlarge

It should be noted that since the report also covers refined products such as gasoline and diesel, that we have included below both a gasoline ETF as well as a diesel ETF for pure play reaction to those specific data points rather than overall crude inventory change.

Also, as seen above we have included XLE in our table since it holds a major stake in the largest oil companies in the U.S. such as a 19.73% weighting in Exxon Mobil Corp (NYSE:XOM), and a 14.81% weighting in Chevron Corp (NYSE:CVX).

Additionally, we included the FXC which represents the Canadian Dollar. When oil rises in price, CAD tends to rise with it, and vice versa.

Conclusion

We hope that this has been a useful and comprehensive guide to using ETFs to trade the EIA Crude Oil Inventories release today at 10:30, as well as for the coming weeks. Since it is an energy futures trader's favorite release, we figured it would be of interest to those more interested/involved in oil and refined product ETFs as well.

We hope that this helps both investors/traders looking to make an anticipatory move leading up to the release, as well as investors/traders looking to make a reactionary move coinciding with the release.

Before doing either, be sure to familiarize yourself with the most recent EIA crude inventories report in order to better react to today's! A link to the most recent EIA release is listed below. The format stays the same week to week, and unless there is a major holiday, these stats are always released the same day and same time every week.

Resources

Jan. 26th API Report

XLE Holdings

CAD and Oil Prices Further Reading

Latest EIA Release

EIA Inventory Histogram

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Not investment advice.