The Phil Flynn Energy Report
Are You Ignorant or do you have an Agenda?
Are you ignorant or do you have an agenda? Well, maybe both. One reason I might be both is that I was shocked at the stunning 7.9-million-barrel increase in crude oil supply reported by the Energy Information Administration (EIA). The reason why I was shocked was based on the most reliable metrics and sources available that indicated the increase in crude supply should have been substantially lower. I am aware that predicting weekly oil inventories is a difficult endeavor but for some of the smartest people in the oil industry to be so far off, it makes one look to the data to find out how we could all get it so wrong.
One glaring difference was a massive drop in U.S. oil exports. According to the EIA, somehow oil exports plunged by an incredible 956,000 barrels a day. Exports fell from 3.327 million barrels a day to just 2.371 million barrels a day. Over a 7-day period that adds to a drop in exports of a whopping 6.692 million barrels. Yet based on some of the best estimates and tanker tracking firms, the reality is that exports last week actually surged. Not just a little but perhaps as high as a record 4.4 million barrels per day. Actual ships with actual barrels. But wait! You are ignorant or you have an agenda if you think that matters.
That is the view of the Energy Information Administration Petroleum Market Analyst Mason Hamilton. Mr. Hamilton went on a twitter storm defending his data. Of course, he does say that his, “tweets and views are my own. It's my data - I'll chart how I want to. Save me from the bunker. Have a nice day.” So while Mr. Hamilton is the lead petroleum analyst for the EIA he is not speaking for the EIA.
Mason Hamilton first tweet read, “Remember: Weekly EIA import and export data are NOT based on actual physical movements. Import/Export volumes only appear in EIA data when the associated paperwork has cleared customs. Track all the boats you want-it’s the paperwork that matters.” He goes on to say that because it is the paperwork and not the physical movements, timing shifts can often occur. Another reason to monitor imports and exports rather than making a big deal of week to week changes. He tweets that: those harping on EIA weekly import/export data without noting these facts are simply displaying their ignorance or have an agenda. So take that.
So those of you struggling in the shale patch looking to the EIA to give you good weekly data to guide your business is simply ignorant of the fact that the EIA data is basically worthless on a weekly basis. Inaccurate weekly swings of millions of barrels that move markets and impact your livelihood should be ignored for at least 4 weeks. Or at least until the paperwork gets done. Of course if you have a problem with that, I am sure you have an agenda, like trying to stay in business.
Beside who cares about a weekly variance on oil inventories of 5 to 10 million barrels a week. What a million of barrels of under or over reported crude supplies from week to week, between friends?
The EIA also admitted that their methodology is flawed. If the private sector can do a better job of accurately reporting imports and exports in a more timely and accurate fashion perhaps instead of daring them, they should engage them or hire them so the weekly EIA is actually relevant. Yes, I am ignorant as to why the EIA puts out data based on a system that may mislead business and traders and I have an agenda to try to get the most accurate data possible for my clients and for the good of the economy overall. It’s clear by Mr. Hamilton’s own admission that it is not about the actual imports and exports. It’s about paperwork. He wants me to acknowledge it. I do acknowledge that. I also acknowledge that the private sector is doing a better job of monitoring imports and exports. I believe the EIA should use the tactics of the private sector to give the taxpayers, who pay for this data, the best most accurate data possible so that they can operate their businesses in the most efficient way they can as opposed to waiting for some bureaucrat to stamp a piece of paper. At the same time, I acknowledge that overall the EIA does a great job most of the time. The oil market has changed faster than the EIA's ability to keep up with it. The fact is the EIA has had a more difficult time changing from a world where the U.S. was mainly an oil importer to now a major exporter.
The EIA also has to deal with shale oil and a more varied and complex blend of crude. They have to deal with new classifications of associated gas, natural gas, and other products. I get it. Yet one change that would be helpful is the modernize their procedures for counting imports and exports. That would be a big plus for everyone on the globe. We will talk about the millions of barrels of previous upward adjustments in EIA oil inventories another time. For the record, I did reach out to Mr. Hamilton for comment. The EIA graciously said that they would get back to me. I thank them.
As far as the rest of the report, U.S. crude oil inventories are about 3% above the five-year average for this time of year. Total motor gasoline inventories decreased by 2.8 million barrels last week and are about 1% below the five-year average for this time of year. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 0.6 million barrels last week and are about 9% below the five-year average for this time of year. Propane/propylene inventories increased by 0.3 million barrels last week and are about 13% above the five-year average for this time of year. Total commercial petroleum inventories increased last week by 3.9 million barrels last week. Total products supplied or demand over the last four-week period averaged 21.2 million barrels per day, up by 2.4% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.5 million barrels per day, up by 2.7% from the same period last year. Distillate fuel product supplied averaged 4.3 million barrels per day over the past four weeks, up by 2.8% from the same period last year. Jet fuel product supplied was up 7.5% compared with the same four-week period.
EIA natural gas report today. After a nice run-up on the coming winter blast, we are seeing some profit-taking ahead of the data.