Many investors know that when a company wants to mitigate media coverage of bad news, they typically release data on a Friday after the close.
Well last Friday, that is exactly what the EIA did, admitting the very thing I and Cornerstone Analytics have been arguing all year: EIA was and still is overstating U.S. production. The amount that they admitted to so far, as of Friday afternoon, was 254,000 barrels per day (b/d) or 1,778,000 barrels per week, 7,112,000 per month or 14,224,000 for June and July alone.
This is the most incredible cover up I have ever witnessed in my decade-long investment career and I have not seen one major media outlet even mention it so far. Instead China demand & Iran output are front and center as per prior posts in an attempt to divert attention (I call it moving the goal posts) away from the fact that both U.S. production and inventories were about to fall. The chart below speaks for itself on what is occurring: Related: Recession Risk Mounting For Canada
Source: Cornerstone Analytics
To be clear, the EIA, on a weekly basis, uses a proprietary model to estimate U.S. oil production and then on a monthly basis uses actual data to revise those figures. Thus, what we were witnessing from Texas RRC data and Bakken output appears to be spot on in estimating that actual production was well below EIA estimates. Related: China Getting Serious About Solar Energy
As a result, the EIA made the correct choice to revise their figures. As time passes, I suspect both June and July will be revised even lower, rendering the analysis of a 14 million barrel overstatement for June and July too conservative.
By Leonard Brecken of Oilprice.com
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