Unaccounted for crude volumes were up 1.6 MMb/d to 2.4 MMb/d for the week ending July 21st, the largest unidentified supply on record. This much unaccounted for crude oil means that all the numbers in last week’s Weekly Petroleum Status Report (WPSR) should be taken with a grain of salt, especially production (12.2 MMb/d) and exports (4.6 MMb/d). When trying to make sense of the WPSR numbers, its important to remember that when crude oil supplies (production + imports + storage draws) don’t balance with total demand (refinery input + exports + storage build), the EIA puts the remainder in the unaccounted for bucket. This number used to be relatively small but has seen a drastic increase in magnitude over the past two years, with most of the values showing that there is not enough supply to balance demand. The unaccounted volumes are mainly due to crude blending, which leads to over-reporting exports, and not counting field condensate volumes, which leads to under-reporting crude production. To remedy this, the EIA said in March that it would introduce a new column in supply and disposition tables to offset the double-counted volumes of natural gasoline and unfinished oils. This will more accurately reflect market participant behavior and reduce the crude oil adjustment. Compared to its preliminary work in 2022, this would add 400 Mb/d to the new “Transfers to Crude Supply” column and reduce total liquids supplied by that amount. The EIA aims to publish the new column in the August 2023 Petroleum Supply Annual and then in the WPSR coming soon.
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What's Your Name - Explaining the EIA's Huge Unaccounted Crude Oil Imbalances
The numbers don’t add up. Literally. The most closely watched energy statistics in the world have a problem, and it’s been getting worse over the past two years. We’re talking about EIA’s U.S. crude oil supply, demand and inventory balances, which are published each week and then trued up about 60 days later in monthly data. The problem is that the balances don’t balance. EIA uses a plug number alternatively called “adjustment” or “unaccounted for” to force supply and demand to equate. That would not be an issue if the plug number was small and flipped frequently from positive to negative, likely due to timing inconsistencies with the input data. But that’s not the case. The number is mostly positive, meaning more demand than supply. And the difference can be mammoth: last week it was 2.3 MMb/d, or 18.4% of U.S. crude production. It seems like barrels are somehow materializing out of nowhere. But now we know where, because EIA just finished a 90-day study of the crude imbalance that reveals the sources of the problem and what it is going to take to fix it. In today’s RBN blog, we will delve into what has been causing the problem, what it means for interpreting EIA statistics, and what EIA is doing to address the issues.
One Piece at a Time - U.S. Crude Oil Supply/Demand Balances, Inventories and Pricing
Last week, crude oil prices dropped below $50/bbl, in part due to continued increases in U.S. crude oil inventories, and fell further over the next few days. Then yesterday, prices perked up by $1.14 to $48.86/bbl; again one of the factors was the weekly inventory number from the Energy Information Administration which showed inventories down by a fraction of a percentage point for the week. The market seems to react spontaneously to changes in that crude-stocks statistic. Up is bearish, down is bullish. These days even a very modest decline in inventories is bullish. But serious analysis requires a more detailed, more nuanced understanding of why crude oil inventories behave as they do. Were inventories driven up by higher production or lower refinery runs? By higher imports? By lower exports? The reasons behind the inventory change are more important than the change itself. Today we continue our series on the modeling of U.S. crude oil supply and demand, and the sourcing of input data used in those calculations.
A Crude Balancing Act – How US Supplies Add Up
Every Wednesday energy markets eagerly anticipate the EIA Weekly Petroleum Supply Report release. Its contents frequently sway the market. Last Wednesday the biggest surprise was a 500 Mb/d reduction in crude imports. Today we start a two part analysis of EIA crude inventory data.
