narvikk
By Bob Iaccino
At a Glance
- Both API and EIA reports can influence crude oil prices, though the API is often used as a preliminary indicator
- The EIA report includes crucial refinery utilization data, providing deeper insights into supply and demand dynamics
In the fast-paced world of energy markets, two key weekly reports provide insights into U.S. crude oil inventories: the API Weekly Crude Oil Stock Report and the EIA Weekly Petroleum Status Report. Both reports are crucial for market participants, but understanding their differences is essential for navigating the complex landscape of energy commodities.
Differing Data
Both the API and EIA reports focus on tracking changes in U.S. crude oil and petroleum product inventories. They are released weekly, with the API report typically coming out on Tuesday evenings and the EIA report on Wednesday mornings (except during holidays). Both reports can significantly influence crude oil prices, especially when the reported changes differ from market expectations.
The primary difference between the two lies in how the data is collected. The API report is based on voluntary survey responses from its members, which include oil producers, refiners and storage facilities. This voluntary nature results in less comprehensive coverage. On the other hand, the EIA report uses a mandatory survey with a larger sample size, including small and independent operators. This broader coverage makes the EIA report more representative of the broader market.
Timing and Impact
The timing of the reports also plays a role. The API report is compiled sooner after the data collection period ends, making it a quicker but less detailed report. The EIA report, however, allows more time to process and verify data, which can lead to variations in the two reports for the same week. Historically, both reports often trend in the same direction, showing builds or draws in inventories. However, the size of the changes reported can diverge significantly.
Traders often use the API report to anticipate the EIA report, but large discrepancies can lead to sharp price adjustments. It’s important to note that the API report should not be taken as a definitive guide to EIA data, especially for exact inventory changes and trade placement. Built on the global benchmark for crude oil, WTI Weekly options offer a precise and cost-effective way for traders to manage risk around these types of releases, with expirations available every day of the trading week. More traders are utilizing WTI Weekly options with annual average daily volume (ADV) in Crude Oil Weekly options growing nearly 75% to over 21k contracts last year, and open interest peaking at nearly 90k contracts on October 24.
The Power of Refinery Utilization Data
One of the critical differentiators of the EIA report is its inclusion of comprehensive refinery utilization data. This metric provides immediate demand signals, offering direct insight into the demand for refined products, particularly non-gasoline products like diesel, jet fuel and industrial chemicals. It also helps traders anticipate potential supply constraints or surpluses in specific product categories. Detailed breakdowns of regional refinery operations help identify geographic supply-demand imbalances, and it aids in interpreting potential inventory changes and future supply constraints, especially during seasonal maintenance periods or unexpected shutdowns.
Turnaround seasons, which typically occur in spring (March-April) and fall (September-October), can vary based on regional factors, market conditions and individual refinery schedules. Many traders are cautious about forming trend opinions during these periods.
Balancing Timeliness and Accuracy
Statistically, while the correlation between API and EIA reports can vary, analysts often observe a correlation coefficient of 0.6-0.8, indicating a moderate to strong positive relationship but not perfect alignment.
Overall, the API and EIA reports are indispensable tools, each with its own strengths and limitations. The API report, with its rapid turnaround, offers traders a quick glimpse into the market, but it should be treated as a preliminary indicator. The EIA report, with its comprehensive and verified data, provides a more reliable and detailed picture of the market.
Traders and market participants must navigate these reports with a discerning eye, recognizing the value of both timeliness and accuracy. By understanding the nuances and differences between the API and EIA reports, market participants can make more informed decisions. For me, the key is to use both reports in tandem, leveraging their unique insights to gain a holistic view of the ever-changing energy landscape.
Original Post
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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