Amending The Adjustment
New EIA oil data methodology better incorporates the double-counting of blended barrels, reducing estimates of headline US liquids demand in the process.
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The EIA recently unveiled the first in a series of remediative efforts to combat the ever-growing “Crude Oil Supply Adjustment” figure and ensure that US oil data better reflect realities on the ground.
The new “Transfers to Crude Supply” column seeks to (re)capture barrels of non-crude that are blended into and treated as crude oil, including [likely] heavier unfinished oils that are imported and blended into domestic feedstock and ultra-light hydrocarbon gas liquids (HGLs) that are blended for higher value export.
The first month of Transfers-adjusted data (June 2023) included a significant downgrade to US liquids demand of 634 kbpd, which reflects that the prior accounting approach was distortionary and effectively causing a double-counting of the demand for those barrels.
Unfortunately, the performance of this newly updated model is still somewhat unclear as the first print of the new revised Adjustment series was, naturally, negative (~200 kpbd) for June; of course, the Adjustment will never perfectly line up (aka equal zero) because the data is noisy, but it’s a good reminder that we’ll need more time to fully appreciate these new dynamics.
The Energy Information Administration (EIA) is finally addressing the ever-growing “Crude Oil Supply Adjustment” figure, which has been signaling to market followers a troublesome misunderstanding of supply, demand, or, most likely, both.
Earlier this year, I wrote in Adjudicating the Adjustment that we “don’t know exactly how much crude oil is currently sloshing around the United States and the problem is only getting worse.” This uncertainty centered around the EIA’s US crude oil supply and disposition data, which should, generally, line up over time. Instead, that delta has only risen over the past few years. After a formal investigation of these growing data discrepancies, the EIA will be undertaking a series of remediative actions to ensure that US oil data better reflect realities on the ground.
The EIA recently unveiled the first of these major changes with the addition of a “Transfers to Crude Supply” category in the flagship monthly and annual US liquids accounting reports. The bottom line? The primary effect of the addition of the Transfers columns is to reduce headline US total liquids demand estimates by an equivalent volume (~600 kbpd in June and averaging ~400 kbpd over the past 18 months) to better isolate what’s really driving the remaining Adjustment.
So, let’s dig deeper into this change as well as the specific liquids and volumes involved to better appreciate how the EIA just changed our understanding of the US oil market.