Uncertain Oil Traders Look to Clashing Stockpile Data for Signsby
API-EIA figures diverge by 2+ million barrels in 6 of 10 weeks
Prices flip as traders seek edge on government supply number
Oil traders don’t know who to follow these days.
Weekly inventory reports that help set prices for crude futures come primarily from two sources: The industry-funded American Petroleum Institute and the U.S. government’s Energy Information Administration. In six of the past 10 weeks, however, the data reported by the two groups has differed by at least 2 million barrels, with the gap for the week ended May 6 at 6.9 million.
That week, the API showed a stockpile gain while the EIA saw a decline, one of eight weeks this year with diametrically opposed results. It’s a divergence that’s sending mixed signals to a market eager to determine when supply and demand will once again steady oil prices.
The frequency of the gap "creates uncertainty in a market that already has enough uncertainty," said Kyle Cooper, director of research at IAF Advisors. "Over time they tend to come together, but on a week-to-week basis it can obviously be very frustrating."
The result can whipsaw the crude market. When the API reported a gain of 3.45 million barrels for the week ended May 6, prices immediately dropped by 26 cents. Eighteen hours later, when the EIA reported a 3.41 million decline, futures jumped 80 cents, according to data compiled by Bloomberg.
The data differences are nothing more than “statistical noise," said Eric Wohlschlegel, an API spokesman. Robert Merriam, the manager of EIA’s oil supply statistics, said "the differences are likely due to the fact that API gets a smaller sample than what reports to EIA, and they have a different method for estimating for non-response and errors."
Traders and analysts watch the weekly inventory data closely for signs the glut that drove oil prices to a 12-year low is dissipating. A rally that has almost doubled prices since mid-February is showing signs of fading, making every data point on production, imports and stockpiles even more important. API’s figures are issued the afternoon before EIA’s data is released.
Traders watch for the API number “because they’re trying to get an edge on the official number," said Robert Campbell, head of oil products research at Energy Aspects Ltd. "They’re looking for any edge they can get."
In January and February, when oil prices were sinking to decade lows, the API sometimes reported gains while the EIA said inventories shrank, and vice versa. In March, they began to show a consensus, typically falling within about a half million barrels of each other. More recently, though, wider gaps have returned, according to data compiled by Bloomberg.
Oil companies are required by law to report their inventories to the EIA, established by the U.S. Congress four decades ago to gather and assess information about all types of energy sources. Response to the API, a trade group established in 1919, is voluntary.
The API releases its data at 4:30 p.m. New York time on Tuesday to customers exclusively through Thomson Reuters, which competes with Bloomberg LP, the parent of Bloomberg News, in providing financial news and information. EIA figures are released to the general public on the agency’s website at 10:30 a.m. on Wednesday.
The EIA’s weekly report looks at the largest companies that have reported holding between 90 and 95 percent of total U.S. crude volume, according to Merriam, manager of petroleum supply statistics for the agency. It then estimates the stockpiles of the remaining 5 to 10 percent of the industry using statistical methods, Merriam said in a telephone interview.
The API collects the same data from companies and says that its numbers cover about 90 percent of the industry and it also estimates the remainder. Any differences between the two reports are largely due to how the two groups factor in the missing 10 percent, API says on its website.
EIA, which this fiscal year has a budget of $122 million from the U.S. government, distributes its data for free.
API referred questions on pricing to its website, which says the group’s fees for its data “depend on the size of the company and its involvement in the API segments." It recently changed its pricing structure for some users, switching the minimum entry level from less than $200 a month for an individual subscription to $2,500 for all users at a single location, according to two customers who asked not to be identified discussing the data costs.