July 30, 2015 – Wall Street Journal
Mixed Signals on U.S. Oil Output
By: Nicole Friedman
Government reports conflict on whether production is rising or falling, puzzling investors
Read the full story here: http://www.wsj.com/articles/mixed-signals-on-u-s-oil-output-1438215062
Many investors piled into the oil market to bet on higher prices earlier this year after the benchmark U.S. oil price hit a six-year low. Expectations were widespread that U.S. production would also decline, and weekly data seemed to confirm that in early April. But traders grew more cautious in June and July as U.S. production held near multidecade highs despite a sharp drop in the number of rigs drilling for oil.
“The only data you can really trust in the very short run is inventory,” because the EIA requires companies to report the size of their fuel stockpiles each week, said Bill O’Grady, chief market strategist at Confluence Investment Management, which manages $3 billion. As for the agency’s production data, “they’re all over the place, they really don’t know,” he said.
Alternatives abound, but even forecasters concede there is as much art as science in many of these calculations. Consulting firm PIRA Energy Group recently told clients that the U.S. produced about 9.3 million barrels a day in April, 400,000 barrels a day less than the government figures show.
PIRA’s April data accounted for lower Texas production due to flooding, while the EIA’s didn’t, said Gary Ross, head of global oil at PIRA.
“We’re all trying to bring exactness to this business that doesn’t really exist,” Mr. Ross said.
The EIA’s forecast that production started falling in May might not be confirmed until 2016, as state-level data keep trickling in.
A year ago, when U.S. output was rising steadily, “you wouldn’t have had a whimper out of anybody” complaining that the EIA production data weren’t up to date enough, said Sandy Fielden, an analyst at consulting firm RBN Energy. “Criticizing the EIA is a bit rich, isn’t it, given that the rest of the world gives you crap data?”
