EIA and API Reports on Energy Fundamentals

Pump jacks and wells are seen in an oil field on the Monterey Shale formation where gas and oil extraction using hydraulic fracturing, or fracking, is on the verge of a boom.
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There is always a lot of interest in the energy markets. Oil, natural gas, coal, electricity and other energy commodities attract attention from producers, consumers, investors and traders. These commodities and their prices affect every inhabitant of planet earth. Prices of all of these energy commodities can be very volatile. While we are all consumers of energy, the energy commodities are an important input for most businesses- in many cases they are key cost of goods sold components. As an example, one of the key inputs in the production of aluminum is electricity. The cost of  fertilizer production includes the use of natural gas. These two businesses are highly sensitive to price changes in the energies needed for production. The examples are endless. Therefore, energy prices have a huge influence on the price of many other commodities and finished goods.

In order to understand energy markets and construct a view on the future direction of energy prices, analysts use both technical and fundamental analysis. Technical analysis involves the study of patterns and price momentum on charts. Fundamental analysis involves compiling and interpreting supply and demand data. When it comes to the energy markets, two sources provide some amazing insights into energy fundamentals.

The U.S. Energy Information Administration (EIA)

According to their website, "The U.S. Energy Information Administration (EIA) collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment". The EIA compiles data and issues reports on petroleum and other hydrocarbon liquids, natural gas, electricity, coal, renewable and alternative fuels, nuclear energy and uranium. The EIA provides reports on energy production and consumption in the United States as well as abroad. They also issue short and long-term reports.

Each week the EIA releases inventory data on a number of energy markets. Prices tend to move, sometimes dramatically, after the EIA releases its numbers. For example, they generally release domestic natural gas inventory data on Thursday mornings at 10:30 AM EST. Industry analysts will estimate the EIA numbers prior to release and if the EIA numbers differ from analyst consensus estimates the natural gas futures market can react violently. In fact, natural gas traders and other market participants often open or close positions because of the weekly EIA inventory numbers. The EIA also releases weekly reports on oil and oil-product market inventories. They issue monthly reports on coal and electric power as well as other energy related subjects. The EIA is a government agency that is a go-to source for fundamental energy data.

The American Petroleum Institute (API)

The API is a national independent trade association that represents all aspects of the American oil and natural gas industries. The API has been around since the beginning of World War I, when Congress and the U.S. oil and gas industries worked together for the war effort. The API also offers educational events, training and certification programs for those involved in the energy industry. They are also a lobbyist advocating for energy related policy on the state and federal level in the United States. The API website is an excellent source for fundamental data relating to the U.S. oil and natural gas markets. The institute also releases data on a weekly basis. The API data offers a view of the U.S. energy industry from its perspective.

When investing in commodity markets it is necessary to do your homework. A combination of fundamental and technical analysis will provide the best picture available for intelligent investment decision making. In fact, since energy affects almost every individual, anyone making investment decisions needs to understand and follow energy markets in order to be an informed investor. Both the EIA and API are tremendous resources for energy market fundamentals. Together, the EIA and API provide a well-rounded view of current data as well as information pertaining to future concerns and initiatives in the energy markets.