By: Bob van der Valk
Crude oil prices will continue to weaken regardless on whether the US raises the debt ceiling. The connection between the value of dollar on the world market had become less of a consequence on commodity prices after the US oil production has been increasing at a fast rate. WCS Canadian sour crude is being discounted between $25 and & $27 a barrel FOB Alberta as of today.
The importance of the EIA data is like the Federal government shutting down the NSA and not have the intelligence data gathering ability to keep us secure. The same applies in the petroleum industry with the EIA-DOE report serving as our weekly intelligence report on which important oil and finished products trading and production decisions are made. Without it we are back in the dark ages on gathering this type of information. The API report has been a guide but not used in the same way at the weekly EIA-DOE report with the API report being mostly ignored by the big traders.
The weekly EIA-DOE inventory report has been very important and proven the API inventory numbers wrong numerous times. The difference is in the methodology on gathering the data between the two reports. The API is Garbage In; Garbage Out (GIGO) with the major oil companies “voluntarily” supplying data whereas the EIA-DOE requires and spells out mandatory figures to be submitted making it more accurate. API also does not distribute the report without a paid subscription whereas EIA-DOE distributes theirs on their: http://www.eia.gov/ web site.
Traders use the EIA-DOE inventory report as the “Tale of the Tape” with any changes being taking into account by commodity traders in making their decisions. They will now be dealing in the dark in making deals. Any major refinery or pipeline glitches may result in price spikes with traders playing it safe by holding onto barrels they would otherwise be willing to sell.
Oil companies use the report to keep an eye in each other and the EIA-DOE report reveals important data about their competitors they would otherwise not be able to attain legally. The EIA-DOE report is therefore the guide presenting facts putting rumors to rest on which some of the trades are made. “Buy on rumors, sell on facts” is the oldest cliché in the trading circle and is alive and well.
During any extended government shutdown we will have more rumors circling around in the petroleum industry without our usual Wednesday morning verification. Meanwhile the reporting entities are still required to submit their data and we may have an interim report once the shutdown ends.
Bob van der Valk is the Senior Editor of the Bakken Oil Business Journal and can be contacted at: editor@bakkenoilbiz.com
