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.
Canadian crude output is rising, requiring new export routes. As traditional pathways face constraints, the U.S. Rockies—especially the Guernsey, WY hub—are emerging as key corridors for moving Canadian heavy crude to downstream markets, including the Gulf Coast.
First of all, it’s important that we acknowledge the awesome work the folks at EIA do for the energy industry day in and day out, and the essential data the agency provides. Their challenges are immense, pulling together disparate data from all manner of sources — some they control and some provided by others. And then they make sense of it all and send out reports and datasets under strict, unyielding deadlines. It’s a tough job. The industry would be lost without EIA’s reports and data. Which is what makes this problem with the U.S. crude oil balance so unusual, and we suspect so frustrating for the EIA team.
Before we get to the problem, let’s go through a quick primer on this piece of EIA’s responsibility: U.S. crude oil supply/demand statistics. When they hit the street, these numbers move markets, not just here in the U.S. but around the world. The weekly inventory numbers take center stage, but changes in stocks are meaningless unless you know why the inventory level changed. Is production up? Exports down? Imports increasing? Refinery runs decreasing? It’s the “why” that market analysts need to assess to make sense out of market developments, and of course, what those developments are likely to mean for the price of crude oil — literally the most important commodity price in the world.
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About the song
“What's Your Name” was written by Gary Rossington and Ronnie Van Zant and appears as the first song on side one of Lynyrd Skynyrd’s fifth studio album, Street Survivors. The song was written about a true story that happened when the band was drinking at their hotel bar and a roadie got into a fight. It resulted in their expulsion from the bar, only to continue their partying with room service champagne at one of their rooms. Released as a single in November 1977, the song went to #13 on the Billboard Hot 100 Singles chart. Personnel on the record were: Ronnie Van Zant (lead vocals), Gary Rossington (guitar), Allen Collins (guitar), Steve Gaines (guitar, backing vocals), Leon Wilkeson (bass, backing vocals), Billy Powell (keyboards), Artimus Pyle (drums), and uncredited horn players (horns).
Street Survivors was originally recorded at Criteria Studios in Miami in April 1977, and then re-recorded at Studio One in Doraville, GA, in the summer of 1977, with Tom Dowd producing. Released in October 1977, the album went to #5 on the Billboard 200 Albums chart and has been certified 2x Platinum by the Recording Industry Association of America. Three days after the album's release, the band’s chartered plane crashed in a field in Mississippi, killing the pilot, co-pilot, Skynyrd’s road manager, and three band members: Ronnie Van Zant, Steve Gaines, and Cassie Gaines. It is the last Skynyrd album recorded by original band members Ronnie Van Zant and Allen Collins, and the only studio album with guitarist Steve Gaines. Two singles were released from the LP.
Lynyrd Skynyrd is an American rock band formed in Jacksonville, FL, in 1964 under the name, My Backyard. The band changed their name to Lynyrd Skynyrd in 1969, named after their high school gym coach Leonard Skinner, who gave them endless grief about the length of their hair. The band was discovered by producer Al Kooper, who signed them to his Sounds of the South Records in 1972. After the plane crash in 1977, the band disbanded, reuniting again in 1987 with Ronnie Van Zant’s younger brother Johnny taking over lead vocal duties. They have released 14 studio albums, six live albums, 23 compilation albums, and 30 singles. In November 2005, the band was inducted into the Rock and Roll Hall of Fame. Twenty-seven members have passed through the group since its formation.
We at RBN are saddened to hear of the recent passing of Skynyrd guitarist Gary Rossington, who had been the last surviving member of the original group. Damon Johnson, who has been filling in with the band while Rossington was dealing with health issues, will continue to tour with the band. They have dates booked through the end of this year. The future of the group after that is uncertain at this time.
Comments
Nice work by EIA and thanks for covering this.
1. I believe the EIA is referring ("field condensate") to condensate that is collected AFTER primary separation and BEFORE the processing plant. "Lease condensate" is just light hydrocarbons collected at the 3 phase separator (initial separation point). The term only applies in certain states like Texas which have wells designated as "gas" or "oil" and have different tax structures. It's just the associated oil from a "gas well" (which matches some definitions of amount of gas to oil). Many states like ND don't differentiate this way so the term lease condensate is completely meaningless in those states. In any case, EIA wants the 914 (monthly production) to include all crude and lease condensate (i.e. liquid hydrocarbons from the three phase separator) regardless if a state calls them crude or lease condensate or doesn't differentiate. And regardless of API (e.g. much of Ohio oil is over 50). "Plant condensate" is the "second squeeze" from cryogenic gas processing plants and is considered a "product" and is called "pentanes plus" and reported. The "field condensate" would be hydrocarbons dropping out ("drip gas") in the lines after the initial separation was made, but before the cryo process. If the three phase separator is the first squeeze and the cryo plant is the second squeeze, then drip gas in between those two points would be the "1.5" squeeze and is not reported in the 914 or the gas plant pentanes plus number. (I don't think your 2012 article really addresses this and it has some other issues...you've done better ones more recently.)
2. For the "blending", I think it would be better to say "blending OR misreported exports". Yes, if there is a fraction (i.e. a product) that is blended into the crude input and the refinery calls it crude, they will overstate C&C inputs (regardless of if the blending happens before the tower, in the crude storage tanks, or even at subunits in the refinery. In theory, refineries should be able to differentiate these, but they may not be doing so, properly. (And if it is the midstream doing it before they buy it, they really can't account for that.) But also there's an issue of these fractions being exported and just mislabeled as crude versus as products (seems like the EIA thinks this is significant.)
3. I'm not sure what scrubber oil is. I guess it is probably the hydrocarbon collected at vapor capture systems on railcars and tanks and vents and the like. (Similar in spirit to drip gas, really.)
4. I'm not sure what skimmed oil is. Googled, but didn't find a good discussion of the dynamics. I imagine it is hydrocarbons skimmed off of wastewater treatment (in the oil industry or even in general).