The weekly update on the amount of
crude oil inventories
in the United States is one of the most important pieces of data
regarding the oil market. Oil traders and analysts closely watch changes
in inventory levels and use them in their analyses and expectations for
oil prices. Inventory data is so important because the amount of oil
inventories serves as a proxy to oil demand. If crude oil inventories
increase weekly, it indicates that demand for oil is falling short of
supply, while if the oil inventories data shows a decline in oil
inventories, it indicates that demand is surpassing supply. With the
supply and demand balance one of the most crucial facts in a commodity's
price, this inventory data has a direct impact on oil prices. Live oil
prices often swing dramatically when the week-over-week change in oil
inventories is significantly different from what analysts forecast.
The two main reports that traders use for a reading on weekly
petroleum stockpiles are the reports released by industry group The
American Petroleum Institute (API) and the government report released by
the U.S. Energy Information Administration (EIA). Among the two
reports, The EIA report is more highly regarded. Find out why.
The American Petroleum Institute
The API is an industry group that represents American companies involved in producing,
refining
and distributing petroleum and petroleum products. The API produces the
Weekly Statistical Bulletin, which reports on refinery operations and
production of the most important petroleum products that account for
more than 80% of total refinery production. Crude oil inventories are
included in this report. The API normally releases its Weekly
Statistical Bulletin on Tuesday at 4:30 p.m. ET. After a Monday holiday,
it is released on Wednesday.
The Energy Information Administration
The EIA publishes the EIA Weekly Petroleum Status Report on Wednesday
at 10:30 a.m. ET, but after a Monday holiday, it is released on
Thursday at 11 a.m. ET. The EIS report provides information on the
supply of oil and the level of inventories of
crude oil and refined products.
Data Collection
The EIA requires major oil companies to complete their oil inventory
surveys. The EIA surveys include a stern disclosure for noncompliance or
intentional wrongdoing, and there are civil and criminal penalties for
failure to file accurate and timely data. The American Petroleum
Institute collects that data “at will,” but according to the API, the
average sample coverage of the API data is about 90%. The stern
disclosures the EIA data includes have analysts and traders believing
that the EIA’s data is more accurate that the API’s.
Congruency of Reports
The API data is often taken as a prelude to the EIA data, as it is
released the evening before the EIA report. There is definitely a
relationship between the two data sets; 80% of the time the data is
directionally aligned. While the data is often similar, at times there
have been large discrepancies. For example, on March 29, 2015, the API
reported that weekly crude oil inventories increased by 2.9 million
barrels, but the following day, the EIA reported an increase of 10.3
million
barrels. Because there is a relationship, and due to the strictness of the EIA collection, it is relied upon in a higher regard.
Other Differences
Although traders may hold the EIA data in higher regard, they have
been relying on the API data for a longer period. Since 1929, the API
has been reporting oil inventory data weekly. The EIA started releasing
its weekly inventory report in 1979. Of note, the EIA also collects and
reports oil production data and, therefore, provides a more complete
picture of the state of the U.S. oil market.
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