Updates
July 19, 2019: see first comment. The reader points out something incredibly important and something the EIA either purposely or inadvertently "forgot" to mention or point out.
In the EIA discussion, the EIA states:
In recent weeks, the crude oil adjustment has been growing in absolute value, as high as 881,000 barrels for the week ending May 24.In my book, 881,000 bbls can be rounded to one million bbls.
According to the reader the EIA omitted two incredibly important words, "per day." I've noted the change as it should have been written in bold red in the original post.
If that's accurate, it means we are talking about as much as 6.167 million bbls "adjustment" per week -- hardly trivial.
Original Post
We've talked about this a couple of times. Sometime in the very recent past, the last month (?), the EIA has apparently changed its methodology for calculating US crude oil inventories.
And here it is, how timely, released yesterday by the EIA, released July 17, 2019, This Week In Petroleum, the crude oil "adjustment" accounts for differences in supply and disposition.
But it looks like this does not explain any change in methodology; it simply explains why "supply and disposition" seldom balance.
The EIA must have been getting a lot of phone calls from Wall Street analysts losing their shirts.
Link here.
The explanation begins:
The U.S. Energy Information Administration’s (EIA) Weekly Petroleum Status Report (WPSR) provides weekly estimates of U.S. crude oil supply, including a measure of how well the supply of crude oil and the disposition of crude oil balance with each other.
This measure—referred to as the adjustment—is a derived term equal to the difference between supply and disposition. If the reported supply and disposition of crude oil balanced perfectly each week, the adjustment would equal zero. For several reasons, however, this is rarely the case.
Weekly U.S. crude oil supply and disposition data are based on a combination of EIA survey data, U.S. Customs and Border Protection data, and modeled estimates. All statistical samples using survey data have small but unavoidable imprecisions, and model estimated data’s precision can vary. This imprecision in estimating each element of the crude oil balance can result in some over- and under-estimation in both supply and disposition.
In recent weeks, the crude oil adjustment has been growing in absolute value, as high as 881,000 barrels [sic; see comment below] for the week ending May 24.
However, this is still relatively small, when compared with the entire U.S. crude oil balance, less than 2.5% on a rolling four-week average basis (the sum of production, imports, exports, and refinery inputs) (Figure 1 at the linked article).
Although an increased adjustment is, in some part, the result of the inherent challenge of estimating perfectly each reporting period, increasing volumes of U.S. crude oil production and exports and other factors may also play a role. EIA will continue to evaluate crude oil data to identify possible sources of the higher crude oil adjustment.
