Oil Trading Strategies with Futures Trader Tracy Shuchart| Podcast

February 26, 2019

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KEY POINTS COVERED IN THIS PODCAST

– How Tracy uses a macro approach to trading the oil market

– The books to check out to improve your oil trading knowledge

– Key oil benchmarks for 2019

Tracy Shuchart is a futures trader with a specialism in oil trading strategies. In this edition of our podcast Trading Global Markets Decoded, our host Tyler Yell talks to her about supply and demand in the oil market, how macro data shapes her trading approach, and the oil benchmarks to pay attention to in 2019. Benefit from the oil trading strategies with Tracy Shuchart and listen to the podcast by clicking on the link.

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Oil trading is a second career for industry expert Tracy Shuchart. Unhappy in medical sales in California, she decided to explore her interest in the commodities market and move to Chicago to pursue a future… in futures.

‘My background is in political science and international relations, with an emphasis on Middle East studies,’ she explains. ‘So my interest in commodities stems from the Middle Eastern politics side, which obviously has a lot to do with oil.’

Tracy observes that, when she moved to Chicago, trading wasn’t an especially female-friendly pursuit, and while she didn’t care what role she took, she found it hard to get a job at all. ‘My first job was as a broker in basically a boiler room selling options and futures, and I worked my way up from there.’

She was trained in the markets, and developed expertise in commodities in particular, from grains to livestock to energy. ‘At one point or another I probably traded everything,’ she recalls.

A Macro Approach to Trading

Today, she focuses largely on a macro approach to trading. ‘I want to know about currencies, the buying patterns of China, for example the manufacturing numbers that I can use to judge Chinese appetite for imported crude oil.

‘In a macro sense you can take all this data and fine tune it to whatever commodity trading you’re doing – not only in energy but grains and livestock and things like that.’

She makes the point that, when using macro factors to influence trading decisions, traders should ensure they understand long-term structural issues affecting the economies of nations.

‘If I’m looking at macro data, Venezuela has been a disaster, but we’ve known that for a while. It didn’t affect oil price; we were just bouncing in that consolidation zone. So Venezuela is factored in the market.

‘Nigeria and Libya have problems but they are long-term issues that are factored into the market by traders.’

But then there are the events that come out of the blue, such as Iran sanctions. ‘It’s about knowing the history, which countries have ongoing problems, which ones don’t, and that means keeping up with the market.’

What books has she found helpful in shaping her approach? ‘’The Prize’ by Daniel Yergin is an excellent book, as well as [Morgan Downey’s] ‘Oil 101’, which is a good book if you’ve never traded oil before. The latter can get quite technical, but it’s useful if you’re a beginner and want to know how to trade oil and what the industry is about.’

Oil Benchmarks in 2019

Benchmarks for 2019? ‘I would really be watching that Brent/WTI spread,’ Tracy says. ‘Right now we have a shortage of sour crude and we have too much light crude, from which you can only obtain gasoline.

‘So everyone’s refining this light crude, and as a result we’re seeing a gasoline glut, with a lower demand because of car efficiencies and other factors.’

She adds that what’s really needed is the heavier ‘gunkier’ crude from which diesel can be refined. Also, she explains that new standards demanded of the shipping industry will mean changing all their fuel. ‘Right now they need light sulfur diesel which we don’t have, and you can’t get it from light crude. With Saudi export cuts, we’re seeing a deficit in the sour crude industry. That’s something I would watch.’

Crude Traders and Volatility

‘Crude traders love volatility, oil producing nations do not,’ Tracy says. ‘If you go back and look at longer-term charts, if you start from 20-30 years ago, crude was trading at $30 forever, but now if you put on a monthly chart, crude has been very volatile.’

Tracy is a prominent voice for OOTT (Organization of Oil-Trading Tweeters) which has grown into a respected resource in the sector. How did it come about?

‘I was talking to [oil trading entrepreneur] Samir Madani who owns [crude oil industry watchdog] TankerTrackers.com, and he came up with it.

‘The idea is we can have a hashtag and then everyone can use it and all the most useful industry information can be pooled. It was his idea and initiative and I and many journalists jumped on the bandwagon.’