Data vital to energy markets

Sam Fletcher
Senior Writer

Fear that the Organization of Petroleum Exporting Countries would undersupply peak market demand for crude in July and August increased the price at which refiners were willing to draw down crude stocks and inflated oil prices in June and July, the International Energy Agency in Paris said in its Aug. 10 monthly report.

Therefore, said IEA analysts, prices remain high and crude futures markets "have been toying with backwardation"—in which futures prices for near-month contracts exceed those of farther-out months—despite high levels of crude stocks among countries of the Organization for Economic Cooperation and Development at the end of June. The September contract for US light, sweet crudes closed at a record high of $78.21/bbl July 31. By Aug. 10, it closed at $71.47/bbl.

Data problems
However, IEA complained: "With the limited hard data to hand, there is still a wide margin for interpretation of current and future fundamentals. We have weekly data for the US and Japan, but to get a preliminary picture of the OECD takes 6 weeks." Outside the OECD, it said, "there is still very little information on stock levels."

Although some countries are struggling to establish data collection systems, most are monitoring stock levels at ports, loading terminals, and refineries. "Many (if not most) companies probably have the ability to report these data on a real-time basis. So why the lack of data?" IEA wondered.

IEA reported two common answers to that question. "Some non-OECD officials have indicated that several years of high prices have led the industry to run on minimal stocks, and they worry that if they release this information, they might push oil prices higher than they already are. That is the easiest issue to address: do not worry—the market already implicitly assumes they are zero," it said.

The second argument is that stock data are commercially sensitive. "That may be the case, but keeping it secret has scarcely led to consumers paying less, and the US and Japan show [timely reports] can be done. US regulations are generally very responsive to industry's needs, yet the comprehensive weekly data published by the EIA demonstrate that commercial sensitivities can be overcome," IEA said.

"This is not just about data coverage. It is also about the timeliness of data. In the OECD, weekly European data are conspicuous by their absence (even China and Russia industry publications provide some weekly data!). While there are some genuine concerns in Europe about cost and quality of the trade data available, some of the often-heard arguments against the publication of more frequent data fail to see the bigger picture."

Some statisticians claim data quality deteriorates if produced more frequently. Others are more willing to accept less accurate but more timely information. "Weekly data are less accurate than monthly data; monthly data are less accurate than annual." But data quality improves when collection is regular and subject to continual assessment. "It is also wrong to interpret the focus on the US weekly data as a sign that more timely data increase market volatility," IEA said. "Experiences in other commodity markets show that it can have the opposite effect."

IEA argues that more-comprehensive and more-frequent data improve market understanding. If that knocks several hundredths of a cent off the price of each barrel of traded oil, it would be more cost-effective than the current situation, where "uncertainties associated with a lack of data could bear a much higher cost," IEA said.

Furthermore, the agency argued that traders' usual focus on the high level of US crude and petroleum stocks as evidence that the market is well supplied ignores the low level of Japanese crude stocks and the average levels of European inventories at average levels. In term of future demand, IEA said, "These stocks are below normal, and logic suggests they may be even lower from a global perspective. Our projections suggest stocks will be drawn down further in August and September, yet when OPEC members come to assess the market at their Sept. 11 meeting, they will have to hand only OECD data from June. If ever there was a compelling argument for the benefits of wider and more frequent stock data coverage, it is now."

US inventories
US crude inventories fell 4.1 million bbl to 340.4 million bbl in the week ended Aug. 3. Gasoline stocks dropped 1.7 million bbl to 203 million bbl. Distillate fuel inventories rose 1 million bbl to 127.5 million bbl.

(Online Aug. 13, 2007; author's e-mail: samf@ogjonline.com)


Related Articles

Trinidad ULSD plant won’t be built in 2015, Petrotrin executive says

01/28/2015 Trinidad and Tobago’s state-owned Petrotrin has announced that its $500 million ultralow-sulfur diesel (ULSD) plant cannot be commissioned because ...

Vietnam advances Dung Quat refinery expansion plans

01/26/2015 Binh Son Refining & Petrochemical Co. Ltd. (BSR), a subsidiary of state-owned Vietnam National Oil & Gas Group (PetroVietnam), has unveiled...

OGJ Newsletter

01/26/2015

International news for oil and gas professionals

Varo Energy plans upgrades for Swiss refinery

01/23/2015 Varo Energy BV, a midstream company owned by The Carlyle Group and Vitol Group, plans to invest more than 50 million Swiss francs ($56 million) thi...

Kuwait lets contract for Mina Abdullah refinery

01/22/2015 Kuwait National Petroleum Co. (KNPC), through a subcontractor, has let a contract to Mushrif Trading & Contracting Co. for work related to its ...

Contract let for Aramco’s Jazan refinery, terminal project

01/21/2015 Saudi Aramco, through a contractor, has let a contract to Alderley FZE, Dubai, a division of Alderley PLC, Wickwar, UK, to provide metering systems...

EPA approves revisions to California’s refinery emission regulations

01/20/2015 The US Environmental Protection Agency has issued a final rule approving revisions to portions of California’s state implementation plan (SIP) that...

LyondellBasell expands roles of three senior executives

01/20/2015

LyondellBasell has expanded the roles of senior executives Timothy D. Roberts, Patrick D. Quarles, and Kevin W. Brown.

Senators introduce amendment to end corn ethanol mandate

01/20/2015 US Sens. Dianne Feinstein (D-Calif.), Patrick J. Toomey (R-Pa.), and Jeff Flake (R-Ariz.) introduced legislation to remove the corn ethanol mandate...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST



On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST


Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected