Commodity Seasonality and News Risk: Reports, Gaps and Event Days

Many commodities have genuine seasonal patterns because harvests, heating demand and driving demand follow the calendar, but much of that is already priced into the futures curve, so a seasonal chart is not a trading signal by itself. News risk comes in two forms: scheduled reports, such as EIA, USDA and central-bank decisions, that you can plan around, and unscheduled shocks, such as wars, storms and export bans, that you can only survive through position size. A simple written event plan protects you from both.

Where commodity seasonality comes from

Seasonal patterns have real causes:

• Natural gas: heating demand in winter, power demand for cooling in summer, storage injections in between.
• Gasoline: US summer driving season; RBOB gasoline futures also switch to a summer-grade specification for spring and summer delivery months, which affects prices.
• Heating oil: winter heating demand in the US Northeast.
• Grains: planting, growing and harvest periods, covered in the agriculture lesson.
• Livestock: grilling-season beef demand, herd and breeding cycles.
• Gold: jewellery buying around festivals and wedding seasons in India and China, a mild effect.

Seasonality is mostly in the curve

Because these cycles are well known, the futures market prices them ahead of time. In summer, the January natural gas contract already trades above the July contract. If you buy January gas in July "because winter is coming", you are paying for a normal winter already. You make money only if winter is colder than expected, or storage turns out tighter, not simply because winter arrives.

Seasonal charts usually show the average path of spot or front-month prices through the year. A futures trader holding one contract experiences something different: the contract drifts towards spot as it nears expiry, as explained in the contango and backwardation lesson. A seasonal "rally" in spot may not be a profit on the futures position you could actually have held.

The data-mining trap

With many markets, twelve months and decades of data, you will always find something that looks like a pattern.

Before trusting a seasonal idea, ask:

1. Is there a physical reason? Harvest pressure has one; "copper rises in the third week of March" probably does not.
2. How many years support it? Ten years is ten observations, far too few for confidence.
3. Does it hold out of sample? Test it on years you did not use to find it.
4. Is it stable? A pattern driven by one or two extreme years is not a pattern.
5. Does it survive costs on the futures you would actually trade?

The scheduled event calendar

Event	When (New York time)	Main markets
API weekly crude estimate	Tuesday 4:30 p.m.	Crude, products
EIA Weekly Petroleum Status Report	Wednesday 10:30 a.m.	Crude, gasoline, heating oil
EIA natural gas storage	Thursday 10:30 a.m.	Natural gas
USDA WASDE	Monthly, 12:00 p.m.	Grains, oilseeds, cotton, sugar, livestock
USDA Crop Progress	Mondays 4:00 p.m. in season	Grains, oilseeds
CFTC Commitments of Traders	Friday 3:30 p.m. (Tuesday data)	All futures
US CPI inflation	Monthly, 8:30 a.m.	Gold, silver, the dollar
US employment report	Usually first Friday of the month, 8:30 a.m.	Gold, oil, the dollar
US Federal Reserve (FOMC) decisions	Eight scheduled meetings a year, 2:00 p.m.	Gold, silver, all via the dollar
OPEC+ meetings	Irregular	Oil

Release days move around holidays, and times are set in New York. Convert to Pakistan time by adding 9 hours during US daylight saving time (second Sunday in March to first Sunday in November) and 10 hours otherwise. Check official calendars each week.

A plan for scheduled events

You have three choices before a major report:

1. Be flat: close or avoid positions in the affected market.
2. Reduce size: hold a smaller position through the event.
3. Hold normally: only if your size means even a large surprise is acceptable.

Whatever you choose, avoid opening new positions in the minutes just before and after a release, when spreads widen and fills are poor.

Unscheduled shocks

Some events cannot be planned:

• On 9 March 2020, WTI fell roughly a quarter in one day after OPEC+ talks broke down.
• In March 2022, after Russia's invasion of Ukraine, wheat prices jumped, and on the London Metal Exchange the nickel price more than doubled in a short squeeze; the LME suspended trading and cancelled trades.
• In 2023, India's restrictions on rice exports moved global rice prices.

These events teach three things. Liquidity can vanish; exchanges can halt or even cancel trading; and stop orders are not guaranteed. The only protection that always works is a position small enough to survive.

Weekend and holiday gaps

Energy and metals futures stop trading from Friday afternoon to Sunday evening New York time. News over the weekend, such as an OPEC+ decision or a geopolitical event, appears as a gap at the Sunday open. CFD brokers often widen spreads around the open as well. Holidays create similar gaps, sometimes with thin trading on either side.

Your event rules: a template

• Before any top-tier event in a market, cut that market's position risk to half of normal, or hold none.
• No new entries within 15 minutes either side of a scheduled release (a guideline; adjust to your experience).
• Cap total open risk over weekends.
• Keep a weekly calendar in Pakistan time listing every event that affects your markets.