One of our pet peeves has been that the quality of data for oil and gas is lousy. Given that these are physical products, bought and sold through many channels, with no way of assuring consistency and accuracy of reporting, it isn’t surprising.
However, what is surprising is that many users of this information treat it as having more integrity than it does.
The latest example come via Tom Kloza on his “Speaking of Oil” blog (hat tip reader MIchael). He gives a detailed account of how EIA gasoline demand reports have been consistently, sometimes markedly, high, with many failing to take note of how their initial estimates are later revised downward.
Kloza expects the recently released January figures to be revised lower as well.
EIA’s weekly numbers have consistently been riddled with overestimation of demand, whether for gasoline, diesel, or for all petroleum products….
In a business where small variations in supply and demand can create huge price movements, the constant revisions are a bit unsettling. During the early part of 2008, chain marketers and fuel suppliers often complained that they thought EIA, API, and even MasterCard SpendingPulse were all guilty of overestimating demand and underestimating demand destruction. From May through July 2008, anyone looking at weekly EIA data might have erroneously concluded that four-week demand trends showed decreases of just 0.4% to 2.4% from the same period in 2007. Once monthly data was recorded, the demand destruction hit 3.23% and it eventually climaxed with a 398,000 b/d or 4.49% loss for September (click to enlarge)….
Despite the huge disconnect between weekly and monthly figures, most marketers respect the task of EIA and don’t castigate the government group for poor record-keeping. Among executives who have worked at refining and terminaling companies, there’s recognition that weekly compliance with DOE surveys is not a priority.
However, the major flaw may be the means by which EIA has to calculate an implied demand figure each week from refinery output, extensive gasoline blending operations, the occasional export, and the disappearance or accrual of inventory. Stocks of gasoline can be drained quickly from terminals if distributors are expecting a stiff price increase, and tank farms can be virtual ghost towns if marketers are aware of imminent decreases.
“All of my dealer customers are essentially ‘day traders’,” one southeastern marketer observed, adding that morning loads of fuel are routinely cancelled when it’s clear that spot prices are headed lower.
Distillate demand is even more difficult to calculate but there too, on-the-field sources suggest that EIA numbers may be inflated. Reports of diesel demand destruction of over 10% versus 2008 data persist.
That said, here are some other interesting statistical tidbits from the final January-November numbers that have been recorded:
– Total petroleum demand in November 2008 fell by 7.7% or 1.577 million b/d. That is the lowest demand level since 1998 when crude oil prices were in the $10-$12/bbl range. This aggregate number reflects a 1.6% revision from the preliminary weekly data reports.
– Exports of distillate hit their highest level ever for an autumn or winter month. U.S. companies exported 544,000 b/d of distillate in November, or some 16.3 million bbl and most of it was destined for Europe.
– The 6% decline in overall petroleum demand during the first eleven months of 2008 represents the biggest percentage slip since the Carter Administration.
– The apex of all-time U.S. gasoline demand is the 9.622 million b/d figure recorded in July 2007. A 10% increase from current levels would be needed to flirt with such a number in 2009.