Oil Markets Are Suffering From A Dearth Of Accurate Data

It's 2023, and the oil markets have clawed their way through the covid muck and are holding their own through the energy transition-aided, of course, by the war in Ukraine and Europe's energy crisis which breathed new life into the need for energy security. But the oil markets are battling against new forces-inaccurate or missing data-and there seems to be no resolution in sight. The EIA's data is the newest culprit gaining attention.

Missing data has been present in the oil markets for quite some time. China-the world's largest oil importer-has concealed production, import, and export data for years. While tanker tracking companies have popped up and demystified some of the seaborne shipments to and from China, no official China figures exist for any of it-least of all, overall demand. This has opened the door for traders to speculate-some with great success, as analysts try to see which way global oil demand is headed, with China in the lead.

Iran has also done a fair amount of obscuring itself, as has Venezuela.

Now, one of the most transparent oil markets in the world-the United States-is having a difficult time supplying the markets with accurate data.

Officially, the government releases data-weekly, monthly, and annually-for oil and gas through the EIA. But it seems to have a data integrity problem, evidenced by the growing adjustment factor presented in its WPSR. In the EIA's weekly inventory report, Line item 13 used to be often overlooked. But it's getting harder and harder to overlook it due to its growing size. The figure has been there for a long time, used to balance out the discrepancy between supply and disposition. It's a book balancer. An accounting trick. A fudge factor used to 'correct' the figures that don't work out. Everyone understood this, and it mostly was ignored. But the growing size of this adjustment factor-which was more than 2.4 million barrels last week-makes one wonder what purpose the figures serve.

When inventories rise and fall a few million barrels each week, and then there is an adjustment (whether that's up or down) 100% that size the following week, it calls into question why anyone is looking at the weekly data anyway.

The EIA has stated it is reviewing the way it compiles its data, and has chalked up the large adjustments on a weekly basis to blending/export problems and production reporting problems, as some light hydrocarbons are often not reported as production at all.

Really, if the adjustment factors need to be more than 2 million barrels in order to reconcile the data, some in the industry find very little use for the weekly data, save trading on the oil price moves they know will come from the initial figures-whether they're accurate or not. Everyone has known that the monthly figures are far more accurate, although not nearly as timely. It may soon be, however, that if left uncorrected for much longer, these large adjustment factors may create extra patience.

Until such time as the adjustment factors come back to earth, the weekly EIA figures should be taken with a pinch of salt.