The Phantom 150,000 Barrel Increase In Production - $Oil $UNG $SPY $XLE $UWTI

By Albert Alfonso

If you would had looked at the headlines after the August 17 EIA Petroleum Inventory report you might have thought that the US was once again over drilling for oil (USO, OIL). Output jumped by 152,000 bpd seemingly out of nowhere. However, this data is not what it seems to be. Rather, this sudden jump in production was result of “noise” in the models the EIA uses and not really indicative of a change in the trend. . . .

Alaskan pipeline maintenance is adding a lot of noise to the numbers

As for Alaska, the EIA data also showed a massive week-over-week spike of 52,000 bpd. Yet, this again is all noise. Though, this time the models are not to blame. Rather, the main Alaskan pipeline underwent maintenance work during the summer and production is now slowly working its way back online.

Conclusion

Was there an over 150,000 bpd spike in production? No, this was all noise. Most people - and traders - only read the headlines, so were left with this mistaken impression. You had to dig deeper - with most of the articles I found coming out on the next day, so old news - to read about the re-benchmarking. As for the Alaska data, most outlets didn’t even bother to report about the pipeline maintenance. Though, given just how short-term focused the market is - especially for crude oil - you cannot expect much nuance from them.




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