IEA - "the usual suspect". Here we go again. WorldOil, November issue
After peaking above $25 per bbl on the NYMEX early last month, crude
prices plummeted only a few days later to $20.90, registering the largest
single-day loss since the end of the Persian Gulf War. The turnaround was
prompted by speculation that Iraq, Iran and some other OPEC members
had boosted their crude output in September. Also causing concern was a
report from the "usual suspect," the International Energy Agency (IEA),
which said global supplies are increasing while wealthy nations are
consuming less oil than expected.
In its October report, IEA asks, "Where's the stockdraw?" which sounds
suspiciously similar to their search for the missing barrels late last year
when their supply figures vastly exceeded consumption and storage
volumes. This time around, IEA is wondering aloud why, with growing world
demand and tightened supplies, OECD stocks haven't fallen significantly in
the third quarter.
IEA says "despite a current third quarter global demand and supply balance that implies an estimated 1.2
million bpd stockdraw, OECD stocks appear to have risen in the third quarter, due in part to upward
revisions for July." However, what is probably happening is that IEA simply collected its regular set of raw
numbers and plugged them into their supply / demand model without checking to see if the raw numbers
made sense in the first place. IEA has certainly been suspected of doing this, as was discussed in this
publication earlier (see June 1999 issue).
According to a Reuters report, other industry analysts are challenging the IEA report, "calling it puzzling and
inconsistent." Peter Hitchens of London brokerage firm Williams De Broe said, "IEA's finding on oil
inventories was a "glaring error?" and noted that alternative surveys showed decreases in oil stockpiles in the
U.S., Europe and Japan.
The IEA is not alone when it comes to suspect statistics, however. An outfit called the Oil Price Information
Service (OPIS) recently surveyed 250 oil company executives with crude supply responsibilities, and survey
results indicated that a majority of these folks have "lost some confidence in API and DOE oil supply data."
Reasons for the lack of confidence included inconsistent data and widespread revisions."
Isn't a shame that a commodity as pervasive and important as oil is being priced based upon numbers
obtained through guesses, lies and downright fabrication? Well, it may get worse--OPIS says its survey also
suggests that the current cash petroleum markets, which now trade as they have for ten years, are headed
for an electronic trading platform within the next three years.
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