01.17.2012
By Terry Flanagan

Energy Traders Get Machine-Readable Data

Oil inventories offer clues on price movements.

Energy traders are being provided with direct access to machine-readable, market-moving oil statistics through a partnership between real-time event data provider Selerity and Genscape, a provider of energy fundamentals information for commodity and financial markets.

Selerity will distribute Genscape’s Cushing Oil Storage Report data via Selerity’s low-latency, machine-readable platform.

“The Genscape Cushing storage figures are watched closely by the world’s oil markets and can have an immediate impact on the West Texas Intermediate Crude Oil price curve.

Providing access to this crucial, low-latency data will help traders maximize alpha and hedge against market risk. “It’s a distribution and channel partnership that allows Genscape to monetize and deliver its Cushing Oil Storage Report in a machine-readable format to the electronic trading marketplace through the Selerity platform,”  Ryan Terpstra, founder and CEO of Selerity, told Markets Media.

The proliferation of electronic trading in the world’s energy markets has accelerated the timescales and impact events have on commodities and oil prices. Combined with ongoing economic volatility, having low-latency access to crude data has become extremely important for algorithmic and high-frequency energy traders.

Through the partnership with Genscape, subscribers gain programmatic access to the bi-weekly Genscape report that provides precise measurements of crude oil in storage at the Cushing, Okla., facility, the physical delivery point for the Chicago Mercantile Exchange light crude futures contracts. This storage gauge impacts the price differential between the front and future contract months and ripples across the price curve. When supplies at Cushing decrease, it may be viewed by the industry as a signal that the major players in the market foresee a flattening of the forward curve, and vice versa.

The facilities in Cushing can hold up to 10% of U.S. oil inventory and play an important role as indicators of market direction for the world’s energy traders.

Since mid-November, Cushing oil supplies, as reported by Genscape, have fallen from approximately 35.5mn barrels to a recent 32.4 barrels, and the price curve has flattened substantially.

“In recent weeks, traders have been taking oil out of Cushing, indicating that they don’t expect the price difference between the months to widen,” Matthew Burkley, CEO at Genscape, told Markets Media.

Genscape gathers its readings each Tuesday and Friday by flying over the facility and using sophisticated infrared technology to measure the capacity in every storage tank. The firm then distills this data and provides real-time updates via Selerity’s real-time low-latency network to electronic trading firms every Monday and Thursday at 9:00 a.m. EST.

The core benefit for Genscape and the algorithmic trading community is the near-instant distribution of actual Cushing supply measurement data.

“For those customers that use algorithmic trading, the delivery of Genscape data through Selerity will guarantee timely delivery of the data in a machine-readable format,” Burkley said.

In the context of low latency, “timely” refers to milliseconds (1/1000) or nanoseconds (1/1000000).

“This means that algorithmic trading operations all over the world will now benefit from the highly accurate Cushing supply data that Genscape provides,” Burkley said.

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