The pros watch warehouse inventories, while many commodity traders just look at price charts. Typically, rising inventories indicate ample supply and can be a drag on prices, while falling inventories often suggest tightening supply and possible price strength.
The market intelligence provided by global reports such as EIA (crude oil), LME warehouse stocks (base metals), COMEX inventories and Indian warehouse data is invaluable.
How to use inventory data:
- Compare actual inventory with market expectations.
- Combine inventory changes with price and volume.
- Avoid trading solely on headlines.
- Study long-term inventory trends.
Conclusion:
Inventory analysis provides traders with an understanding of the balance between supply and demand and when combined with technical and derivative analysis, it improves decision-making.
