If the US government shutdown continues for more than a few days, commodity markets will find themselves flying blind, as the public servants responsible for producing statistics on which traders and investors rely are sent home.
The Commodity Futures Trading Commission (CFTC) has said it will not publish the commitments of traders and other market reports during the shutdown, depriving participants in the world’s biggest derivative markets for energy and agricultural products of price-moving information about the positions of other producers, consumers and speculators.
The Energy Information Administration (EIA) has sufficient funds carried over from the last fiscal year to keep operating and will publish weekly data on physical oil and gas supplies for the time being, but the agency’s funding will run out around October 11, according to officials, at which point publication will have to cease.
Of 365 senior officials, other staff and contractors employed at the EIA, only three are excepted from the furlough and will not be sent home once the money runs out, according to the shutdown plan published on the Department of Energy’s website.
At the CFTC, out of 680 employees, just 28 are excepted, enough to provide “a bare minimum level of oversight and surveillance,” as well as some whistleblower functions not funded by annual appropriations, according to the shutdown plan the Commission sent to the White House Office of Management and Budget.
The extent to which commodity markets rely on federal data is hard to exaggerate. Weekly and monthly data on energy supplies, demand and stocks from the EIA regularly move derivative prices and provide some of the most important real-time context for oil markets worldwide.
The CFTC’s information about the positioning of market participants is less immediately price-sensitive but helps shape strategy for both hedgers and speculators across many energy and agricultural markets worldwide.
All of this is now at risk. The federal government’s entire commodity data publication programme will cease if the shutdown lasts more than about 10 days. At that point, the market will trade in a partial information vacuum.
Markets thrive on hard data — as well as rumours, speculation and differences of opinion. An information vacuum will tilt the balance between market participants in ways which could sharply reduce trading volumes.
In particular, while some of the larger market participants dealing actively in physical commodities (“insiders”) may remain confident about trading financial derivatives too, based on their information about the underlying flows, less well-connected participants (outsiders) may conclude the information asymmetry is too large and decide to scale back or not trade at all, severely curbing liquidity.