Oil Traders Lose Key Market Data With Government Shutdown
Oil traders are losing a key weekly report on supplies because of the U.S. government shutdown, threatening to reduce market volume and boost volatility.
The Energy Information Administration said today it ceased operations and furloughed staff, stopping publications including the 34-year-old Weekly Petroleum Status Report on Wednesdays, which includes crude oil and gasoline data. The suspension means the market will turn to commercial reports from organizations such as the American Petroleum Institute, an industry-funded group that gives paying subscribers first access to the information.
Traders already lost a separate weekly government report on hedge funds’ holdings of futures and options positions. The EIA stoppage may add uncertainty to the market, potentially discouraging data-driven traders from placing bets and increasing market volatility.
“Losing any such really high-quality data source would be worrying,” said Julius Walker, global energy markets strategist at UBS Securities LLC in New York. “It would create a lot more uncertainty and possibly volatility in oil prices because we’d just have less of an idea of what’s going on. The API numbers are based on a voluntary survey, so they don’t capture all the companies.”
The EIA, the Energy Department’s statistical arm, is closed because of a lapse in funding and its website stopped updating from 1 p.m. Eastern time today, the agency said. Data releases and analysis will not be published during the furlough and the website and social media won’t be updated, Jonathan Cogan, a spokesman in Washington, said in an e-mail. EIA’s 346 federal workers and 215 contractors will be affected, the agency said.
“It’s definitely a less clear trading landscape for us and we are going to pull back,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “I am sure a lot of other fundamental traders will do the same.”
The agency’s weekly report, started in April 1979, has never encountered interruptions related to a government shutdown, Cogan said. It delayed the Feb. 9 report in 2010 for two days as a snowstorm forced federal offices in Washington to close. The EIA also publishes a natural gas inventory report every Thursday.
Oil and gas markets may be more volatile as the reports are suspended and traders speculate on changes in supplies, according to Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York.
“We’re going to see increased volatility because the market won’t know what the actual storage number is,” Yawger said. “The assumption would be that both crude and natural gas inventories will tend to build at a quicker rate in the next couple of reports, but there’s a degree of uncertainty.”
The petroleum report, based on a weekly mandatory survey of energy market players including producers and refineries, includes inventory levels of crude oil, gasoline and distillate fuel, as well as the storage levels at Cushing, Oklahoma, the delivery point for WTI futures traded in New York.
“There are some traders that just won’t trade because they don’t have anything to trade on,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “But one person’s problem could be another person’s opportunity. Some people may be able to take advantage of thin volume and possibly higher volatility.”
The EIA had been scheduled to release next week’s report on Oct. 17, a day later than normal because of the Columbus Day holiday. Genscape Inc., which uses infrared cameras to measure storage levels, said it plans to post its data on Cushing inventories free for the public at 10:30 a.m. Oct. 17.
The API’s Weekly Statistical Bulletin, started in June 1929, provides less data than the EIA report. The Washington-based organization releases the report Tuesdays at 4:30 p.m. to subscribers who pay a $160 monthly fee. Bloomberg customers can get the report by paying $120 a month through the terminal. Newswires including Bloomberg and Reuters are allowed to print the data at 4:35 p.m. to general readers.
“You can go to jail if you don’t contribute to the DOE and if you contribute bad numbers they can sue you,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “The API asks its members to contribute. The members sometimes don’t, and sometimes they give the API incomplete numbers.”
Carlton Carroll, an API spokesman in Washington, said the institute’s data are “reliable and accurate.” Next week’s report will be published on Oct. 16, a day later than normal because of the Columbus Day holiday, he said.
Valero Energy Corp. (VLO), the San Antonio-based biggest independent refiner in the U.S., is not a member of the API and doesn’t participate in the weekly survey, said Bill Day, a company spokesman.
Valero produced 910,000 barrels a day of distillate fuel, including heating oil and diesel, in the second quarter, according to the company’s earnings release. That’s about 20 percent of the 4.66 million-barrel-a-day U.S. output reported by the EIA. The company operates a plant in the U.K. that produces about 100,000 barrels a day of distillates.
“Their lack of participation means that API’s distillate figures are essentially worthless,” said Tom Finlon, Jupiter, Florida-based director of energy fund Energy Analytics Group LLC.
The closure of the EIA came at a time when 24-year high crude production has boosted inventories and reduced price fluctuation in West Texas Intermediate crude, the U.S. benchmark.
Implied volatility for at-the-money December options, a measure of expected futures swings and a key gauge of value, dropped to 19.8 percent on Oct. 4, the lowest level since April. The gauge was at 20 percent at 3:55 p.m., according to data compiled by Bloomberg.
WTI futures fell 99 cents, or 1 percent, to settle at $102.02 a barrel today on the New York Mercantile Exchange. Prices slid 1.8 percent this week and are up 11 percent this year.
The Commodity Futures Trading Commission said on Oct. 1 that it will not publish data including the weekly Commitment of Traders report during the government shutdown. The COT report, normally released on Friday afternoons, covers futures positions held by producers and hedge funds.
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