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Advanced Fundamental Analysis for Commodities

Fundamental analysis included examining factors related to the global economy, geopolitics, interest rates, and inflation that influenced the supply and demand in the commodity market. This helps investors see the bigger picture and assists traders or investors in making better decisions.

In this lesson, we will teach you how to read the inventory report and the OPEC report, how to analyze data on metals and energy, such as gold and oil, and how professional traders combine fundamental and technical analysis.

Inventory Report

The inventory report helps investors gain insight into an equilibrium between supply and demand (as addressed in lesson 2). Commodity prices often fall when supply increases and rise when demand increases.

The crude oil inventory report is released weekly in two reports: The U.S. Energy Information Administration (EIA) and the American Petroleum Institute (API)

• If crude oil inventory increases weekly, it means there is more supply than demand, or that oil reserves are being built. 

• If crude oil inventory decreases weekly, it means demand exceeds supply, or that more oil is used than the reserves can replenish.

What is the American Petroleum Institute (API)?

The API is an American industry group and was founded in 1919. The report is only available for the members who currently have over 600 members from the oil industry and companies. The API involves producing, refining, and distributing petroleum and its products.

Source: American Petroleum Institute (API); Trading Economics

The report indicates that oil prices fell by 399,000 barrels in the week of July 3 after dropping by 6.072 million barrels in the previous week.

This shows that the commercial crude oil inventory has been continuously declining, while the government's petroleum reserve also fell by 6.2 million barrels.

The Gasoline and distillate inventories also fell from 13.819 million bpd to 13.810 million bpd. It's important for investors to see the Actual, Previous, and Consensus prices.

As shown in the United States API crude oil stock change image, the consensus is -1.5m, indicating analysts expect a decline of 1.5 million barrels, but it actually fell by -0.399m, which is much lower than expected. This shows a short-term bearish as it fell less than expected.

What is the U.S. Energy Information Administration (EIA)?

The EIA is an independent organization that collects and analyzes energy information in the United States to support efficient policymaking and public awareness of energy. This report is released weekly and provides information on oil supply and the levels of crude oil and refined product inventories. 

Source: Weekly Petroleum Status Report; U.S. Energy Information Administration (EIA)

The report showed the U.S. commercial crude oil inventories increased by 3.0 million barrels to 411.4 million barrels. The inventory is about 6% below the five-year average, indicating limited supply.

Gasoline inventory fell by 1.9 million barrels from the previous week, and distillate inventory fell by 5.0 million barrels, indicating strong fuel demand but lower refined product inventories. In the long term, this continues to positively support the crude oil demand.

Refineries operate at 95.8% of capacity, which means they can still produce a large volume of crude oil to meet fuel demand and increase oil inventory. The total product supplied averaged 20.6 million barrels per day, up 0.3% from a year earlier. But gasoline demand fell 2.2% from last year, while jet fuel demand increased 4.1%.

This shows that air travel is growing as gasoline prices become weaker. Crude oil imports averaged 5.06 million barrels per day, an increase of 351 thousand barrels per day, which is 11.4% less than the previous year. This suggests that fuel costs have eased, although prices remain higher.

This report shows that crude oil prices are slightly bearish in the short term. However, the midterm shows that gasoline and distillate inventories continue to decline and remain below the five-year average, indicating they are not oversupplied.

OPEC Report

The Organization of Petroleum Exporting Countries, or OPEC, was founded in 1960. OPEC is the largest crude oil producer and exporter, including 12 major oil-exporting nations, such as Kuwait, Equatorial Guinea, Iraq, Iran, Saudi Arabia, the United Arab Emirates, Nigeria, Algeria, Venezuela, Gabon, and Equatorial Guinea, that use petroleum policies. 

There will be an OPEC ministerial meeting where members come to discuss the policy or market conditions twice a year to decide whether to reduce or increase the oil output, which member will be the product, and how it affects the global economy, according to OPEC.

Source: Argus and OPEC

The crude oil prices in the June 2026 report show the OPEC basket fell by $24.80/b to $89.75/b, while ICE Brent declined to $84.43/b and NYMEX WTI to $81.79/b, reflecting the geopolitical risk situation.

Brent and WTI futures and options are currently pulling back to 245 million barrels between late May and June 30. The oil market is relatively limited, as OECD commercial inventories fell by 21.8 million barrels to 2,770 million barrels, 49 million barrels below the five-year average.

Source: OPEC

In the meantime, the DoC crude production, which includes the US, Canada, Argentina, and Brazil, increased by approximately 3.0 million barrels per day to 36.28 mb/d in June, while non-DoC supply is projected to grow by 0.6 mb/d in both 2026 and 2027. This could stop the continuously rising oil prices unless demand increases, thereby reducing supply.

The rising demand is expected to reach 0.8 mb/d in 2026 and 1.9 mb/d in 2027, driven by non-OECD economies, including India and other Asian countries. Oil prices are relatively volatile in the short term, given that inventories remain historically low.

Economic data Analysis of energy and metals

Another case study from Metal and energy price uncertainties and the global economy (Natalia Ponomareva, Jeffrey Sheen, Ben Zhe Wang, 2024), based on 20 commodities, such as 14 metals and 6 energy commodities, between January 1995 and April 2023. It results in energy and metal impacts on global economic uncertainty.

Source: Metal and energy price uncertainties and the global economy;  Science Direct

The image above depicts the impulse response to a shock in energy price uncertainty (EPU). Each chart represents:

• MSCIR (The returns of the global stock market index)

• GFU (The global financial market uncertainty)

• GEA (The global economic activity measured by the growth rate of world industrial production)

• GEAU (The global economic activity uncertainty)

• EPR (The energy of the price returns)

• EPU (The energy price uncertainty)

The benchmark VAR models were identified using MSCIR, GFU, GEA, GEAU, EPR, and EPU. They show the response of the economy to a positive standard deviation shock to metal or energy price uncertainty, with the shaded area indicating the 90% confidence interval using the bootstrap-after-bootstrap method of Kilian (1998).

A positive one-standard-deviation metal price shock is associated with a 0.07% per month growth rate in world industrial production, with the largest decline occurring 5 months later.

Global stock dividends declined by 0.56%, and metal prices declined by 0.30% over 4 months. While the uncertainty of energy prices will further depress them by more than 0.40% over 4-month periods, it will also contribute to the slowdown of the global economy.

The case study shows that commodity price changes shaped the global economy and its future direction. When investors or suppliers can’t predict market conditions in metals and energy markets, it often leads to delays in investment, slower production, and financial volatility. That’s why traders and investors need to follow news events to analyze global economic risks. financial policy.

Combine Fundamental Analysis with Technical Analysis

Technical analysis uses price charts to identify entry and exit opportunities. Fundamental analysis provides deeper insights into global economic factors, the company’s financial health, and the industry's health. Combining technical and fundamental analysis can provide stronger information for investors to approach the market and make better investment decisions.

Step 1: Follow with Fundamental Analysis

The first step is to follow major and financial events on websites like Forex Factory, where traders can get notice of daily news that will impact markets, including commodities, assets, foreign exchange, and indices. News in the US usually impacts the market when the New York session opens. This helps traders plan their technical analysis and timing for trades.

Step 2: Trade with Technical Analysis

Once you see what time the news will be released and how it will impact the stocks or commodities that you want to trade. Now, use the technical indicators to help you plan the trading setup, whether for entry or exit trades. Traders often use technical indicators to analyze trading volume or to combine with RSI, MACD, or Bollinger Bands, as we discussed in Lesson 3.

Step 3: Align Trades with Fundamental Analysis

After setting up trades, make sure they align with the specific trading rules and the fundamental analysis.

Source: Forexfactory

For example, according to Forex, US Core CPI inflation declined to 2.6% in June from the expected 2.8%, suggesting a downtrend for the USD.

Key Takeaways

• Fundamental analysis is an essential tool for investors as it is strongly influenced by the global supply and demand.

• Inventory reports and OPEC reports can provide investors with deeper insights into the short- and long-term outlook for the commodity market.

• Combining technical and fundamental analytics will help you create a more effective trading plan and align with the currenct global situation.