Crude Quality and EIA’s ‘Adjustment’, Trading in Yuan, and EU Gas Mix

Why is the EIA reporting condensate as crude?

Crude Quality and EIA’s Adjustment

The US Energy Information Administration (EIA) publishes the Weekly Petroleum Status Report that includes inventories, production estimates, imports, exports, crude inputs into refineries, refinery utilization, and other details.  In recent months, many analysts and traders have complained about the continuous increase in the “adjustment” number, a sign of a serious deterioration in the quality of the data. This “adjustment” is a balancing item that reflects what is known as the “missing barrels”.

The 8-page EIA weekly report is full of detailed data. Figure (1) below shows the first page of last week’s report carrying an adjustment of 2.266 million barrels per day (b/d). This means that there are about 15.6 million barrels (mb) uncounted for in the previous week which had to be added as a balancing item between supply and demand. 

Figure (1)

The First Page of the EIA Weekly Report (follow the double-headed arrow)

What is the “Adjustment”?

The EIA uses a supply and demand equation to estimate the variables of each side. If both sides are not equal, this means something is missing. The difference between the two sides is the “adjustment.” Before we continue discussing this subject, we share below important equations to illustrate the issues related to the “adjustment”:

1. Supply: Domestic Production + Imports

2. Demand: Refinery inputs + exports + inventory change

3. Supply = demand

4. Domestic Production + Imports = Refinery Inputs + Exports + Inventory Change

Now, let us insert the latest numbers from the EIA in Figure (1) above (all in mb/d):

Supply: 12.3 + 6.208 = 18.508 mb/d

Demand: 14.979 + 5.629 + (1.2/7) = 20.78 mb/d

Notice that both sides are not equal, and the difference is: 20.78 – 18.508 = 2.27 mb/d.

Please note that the adjustment has nothing to do with inventory estimation! Production is estimated using the EIA model since actual production data takes time to be collected. Imports and exports data are collected from US Census Bureau.

The most important point here is that the adjustment number is calculated independently of inventories. Inventory data is collected based on surveys.

By looking at the equations above, the suspects are clear: production estimates and international trade data.  It is also worth noting that estimates of imports and exports reported by the EIA are different from the data provided by monitoring companies because of the method of calculation, and the specific week for which the data is counted. 

What Did the EIA Say?

As the number of complaints kept growing about the continuous increase in adjustment (see Figure 2), the EIA decided to conduct a 90-day investigation.  The EIA Administrator, Joseph DeCarolis, tweeted the results of the investigation in a long thread, which we share below.