Citi Issues Warning About Latest EIA Oil Production Data

In a new report, Citi Research analysts caution anxious oil investors about relying too heavily on the Energy Information Administration’s (EIA) weekly oil production statistics. According to analysts, there is often a major disconnect between the EIA’s weekly estimate and the actual production from the field.

The latest number
The most recent report from the EIA showed production in the lower 48 U.S. states was flat week-over-week at 8.861 million b/d after having fallen for several consecutive weeks. Output including Alaska’s numbers fell by 18,000 b/d to 9.366 million b/d.

Why the weekly numbers matter
Oil investors are watching these weekly EIA estimates for any indication that U.S. oil production has peaked. Negative production growth will be a critical step in eliminating the current oil oversupply glut that has caused a collapse in crude prices.

Why investors should be careful with the EIA numbers
Citi analysts believe that the weekly EIA numbers can be a useful tool for investors if they know how to use them properly. Analysts point out that the EIA weekly production number is not hard data; it is an estimate generated from a model.

“An analysis of historical short-term supply estimates against more complete lagged data (which come several months later) shows the more short-term EIA estimates underestimated final data by as much as 200-k b/d over the last year,” analysts explain.

Analysts believe that weekly fluctuations less than 200,000 b/d in the EIA production estimates are within the estimate’s margin of error and should not be relied upon as significant production changes.

Shares of the United States Oil Fund ETF USO are up more than 20 percent in the past month, but remain down 45 percent compared to one year ago.