Explaining Fundamental Data In Oil: Which Figures Should You Look At?

During Wednesday’s PreMarket Prep, Benzinga discussed weekly oil data with Garrett Cook.

Cook first looked into American Petroleum Institute (API)’s information, which last published crude oil inventory data Tuesday evening. As per the numbers issued, crude inventories drew by 7.5 million barrels instead of surging by 2.3 million barrels as expected. Keep in mind, however, that this is a private institute that issues estimates and not official data.

On Wednesday morning, the U.S. Energy Information Administration (EIA) issued the official numbers, using a new, more precise formula, to avoid errors it committed in the past — the agency recently said it had been overestimating stockpiles by about 16 percent. Interestingly, the figures were not far from API’s estimate: Crude inventories tumbled by 6.2 million barrels last week to 504.6 million barrels.

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Finally, there’s Baker Hughes Incorporated BHI’s data, which come out every Friday, Cook explicated. For more than 70 years now, the company has been publishing rotary (on-and-offshore) rig counts for the United States and Canada every week.

“It is critical to remember that efficiencies have improved over the past half century, so even though we may see some rig numbers decline, that’s going to impact short term traders based on just expectations,” Cook added.

“More importantly, the big money guys typically don’t look at rigs. They really aren’t too concerned with it outside a nominal number basis, but it does provide an opportunity on a slow Friday afternoon for traders to get hold of their books and see what they can scalp really quick,” he continued.

Since Cook works with the aforementioned “big money guys,” he likes to use the API numbers, he concluded. “It’s the first read; we know that we can count on what they are doing because of their ability to track some of these numbers differently than the EIA [and read reserves in real time],” Cook concluded.

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