EIA data sends oil prices lower, but how accurate is it?

21 July 2010 21 July 2010

BonTrade

Oil prices dip lower as the latest weekly EIA US crude oil stocks report showed a unexpected increase in oil inventories, but how accurate is it?

US Light crude oil futures were trading at $77.15, 18.00 GMT on the NYMEX, while London Brent crude oil futures were at $75.98, 18.00 GMT.

Last week, the US government delayed plans to bolster the accuracy of its crude oil inventory surveys from the EIA, despite concerns about the reliability of the data.

How Accurate is the Weekly EIA Data?

A report in 2009 found “critical” shortcomings in the weekly surveys published by the statistical arm of the Department of Energy including decades old data processing methods and a bare bones staff with little time to catch errors before the survey is released each week.

The EIA report, released on Wednesdays at 14.30 GMT, gathers oil storage data from the biggest US energy companies, but some of the data is handled manually.

In the US, every week sees the EIA report on stockpiles of crude oil, gasoline and distillates, which traders can use to help them figure out possible future moves in oil prices.

A consultant hired by the EIA found its outdated technologies and methods used to collect data “may create an unacceptable risk of failure for this flagship report,” according to documents obtained by the Wall Street Journal through a Freedom of Information Act request.

The US government can’t even accurately count how many people in the US are unemployed, so how then can a “bare bones staff team” count the ebb and flow of oil and all the different types of refined products over five distinct market areas on a weekly basis?

But for now it seems that many investors and oil traders still view the EIA data as an influencing marker of oil prices…