The energy sector plays an important role in the financial market. Today, energy products like crude oil, natural gas, and heating oil are some of the most heavily traded assets in the market. To make informed decisions, traders and investors use data from several important organizations like the Organization of Petroleum Exporting Countries (OPEC), Energy Information Administration (EIA), and the International Energy Agency (IEA). In this article, we will look at some of the important reports by IEA that forex and oil traders should monitor.
What is IEA?
IEA is a leading organization that is headquartered in Paris, France. The organization traces its roots to the global energy crisis of the time as the Middle East oil producers decided to stop shipping to America and its allies. The strong demand and low supply dynamics led to a significant increase in oil and gas prices.
Today, the International Energy Agency is a leading analytics organization that publishes some of the closely-watched numbers in the industry. Over the years, it has expanded its work from just oil and gas to other renewable energies like solar and wind.
In addition to reports, the IEA consults with other government and independent organizations on energy. On this, it helps policymakers come up with energy policies now that energy has become an important part of the economy.
IEA has about 30 member countries because it was a brainchild of the Organisation for Economic Co-Operation and Development (OECD). Some of the member states are the United States, Belgium, New Zealand, and Japan.
Why IEA data is important in forex
From a distance, IEA data does not seem relevant in the forex market. However, in reality, most forex traders pay close attention to the data because of the impact of crude oil on several currency pairs and the broader economy.
For example, higher oil prices are usually positive for some economies like Canada, Mexico, and Norway. As such, their respective currencies tend to do well in these conditions because it leads to higher demand.
Therefore, as a forex trader, it is always important to focus on data about energy. In addition to reports by the IEA, you should also focus on those from the EIA and OPEC. So, let us look at the most important IEA reports to watch.
Oil Market Report (OMR)
The IEA publishes several reports. While most of these reports are important, I believe that the monthly Oil Market Report is the most important, especially for oil and forex traders.
The OMR is published every month and is one of the most comprehensive reports in the world. In it, the organization looks at the previous month’s performance of the oil sector and then comes up with a forecast of what will happen in the coming months.
The IEA uses its proprietary data to come up with a forecast for the upcoming month. Most importantly, the agency comes up with its forecast about demand and supply. For example, in its December 2021 report, the IEA predicted that oil demand was expected to rise by about 5.4 million barrels in 2021, followed by 3.3 million barrels per day in 2022. These forecasts can help traders and investors in the oil industry know about how to position themselves.
The OMR report also looks at oil demand for most members and their refinery output. It also looks at the trends in supplies and the key risks that could affect the industry.
Still, like all reports, the OMR is not always perfect. This explains why the agency is used to downgrade or upgrade its previous reports.
You can view the release of the OMR report in the economic calendar. According to its website, the IEA sells the report for between €2,850 and €14,250 per year. Still, for an average trader, it is not worth paying for the report since its details are widely published in the media.
World Energy Outlook (WEO)
The IEA publishes a comprehensive report known as the World Energy Outlook. It is a long report that can go to 400 pages, including charts. The report normally comes out every November, although the month has been changed several times before.
The WEO report is different from the OMR. For one, the WEO covers a broad segment of the energy market. It looks at oil and other forms of energy like natural gas, wind, and solar. In addition, the report covers other things like climate change and identifies key solutions.
While this is a good report, forex and oil traders don’t find it extremely useful because of its long-term views. Also, it is more geared towards policymakers.
Global Energy Review (GER)
The Global Energy Review is another report that the International Agency publishes every year. It is usually a relatively short report of about 35 pages. In it, the agency’s experts examine the full spectrum of energy issues like oil, gas, and coal in its member states.
It looks at the concept of demand and supply. Precisely, it looks at areas of the economy that are driving oil demand and predicts what will happen. Also, it looks at the geographical demand for oil and gas.
This report tends to have an impact on oil prices when it is released. Therefore, as an oil and forex trader, it is recommended that you go over it and identify the key trends.
The IEA is one of the leading players in the energy sector, and its reports are followed closely by investors, traders, and policymakers. As a forex trader, having this information will help you make informed decisions. Still, we recommend that you incorporate this data with that of other agencies. The one that leads to significant volatility is the weekly inventories by the EIA. This report comes out on Wednesday. You should also focus on monthly reports by EIA and OPEC.