Most of us after the holidays are ready for a change. That is why we try to make New Year’s resolutions, such as to lose weight, stop smoking, save more money, and spend more time with family. Some people, mainly women, simply like to change their look or improve their appearance.
At the Oil & Gas Journal, we have in the past changed the look of the magazine so that it appears sharp and serves readers better. Over several years we have adapted and utilized new computer software to enhance the quality of color, layout, and art.
Statistical changes
Another area of steady progress at OGJ is statistical reporting, which has changed in both format and content to help readers analyze oil and gas operations and markets.
Several years ago, for example, we added to the Newsletter at the front of the magazine bar graphs of price data for crude oil, natural gas, and oil products and linear graphs of rig counts.
A new look that includes a content enhancement occurs this week. The Scoreboard in the Newsletter has a new data series.
For many years, the Scoreboard has summarized data on US oil supply, demand, refinery operations, inventories (stocks), and crude and gas futures prices. Now it also includes US Energy Information Administration numbers depicting stocks of crude, total motor gasoline, distillate fuel, and propane in terms of days of supply.
Inventory figures are under much analysis these days, as huge swings in inventories affect prices. Information on days of supply provides a new dimension of analysis.
EIA calculates days of supply for a commodity by dividing inventory levels by the average daily amount supplied or, for crude, refinery inputs during the prior 4 weeks. The calculation thus relates absolute stock levels to recent consumption rates.
The resulting number, days of supply, is sometimes called “stock cover.” Some analysts divide stock volumes by projected daily consumption rates to yield “forward cover.”
Assessing adequacy
Stock cover is a valuable test of the adequacy of oil or gas in storage.
Stocks represent immediately accessible supply and serve important operational functions. A refinery that receives intermittent deliveries of crude by tanker, for example, must use storage to stabilize flows into distillation columns.
But stocks also provide buffers against supply disruptions-for individual refiners, for other positions along the distribution chain such as pipelines and terminals, and for the whole market. It’s in US oil markets that the new EIA data on days of supply will be valuable.
A stock level of x might represent an adequate-or at least historically normal-cushion at consumption level y. But at consumption level 1.5y, the same stock level would be low, probably perilously so. It covers proportionally more days of consumption at level y than at 1.5y.
So an observer might see inventory levels of crude oil holding steady over several years and think conditions are normal. But if demand, measured as input to refineries, rises steadily over the same period, the actual supply buffer actually is shrinking. The effect, not evident in stock volumes, would show up as a shrinking days-of-supply number.
Those are simple illustrations of the much more-sophisticated analyses that are possible with the new data series, which will appear weekly.