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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Big Dog who wrote (48753)	8/2/1999 11:19:00 PM
From: Tomas	Read Replies (1) \| Respond to of 95453

Bloomberg, Aug.1: Among the statisticians at the U.S. Department of Energy, the nation's crude oil inventory figures are known as the ''Weekly Wobble.'' Early in July, the wobble got out of whack. The government overstated the drop of U.S. inventories. That miscalculation, based on poor reporting by oil companies, helped push oil prices up to $20 a barrel for the first time in almost two years. Last week, the DOE went back in time and added millions of barrels to earlier estimates, up to 2 percent. The revisions by the DOE were so big that that had the inventories been tallied accurately in the first place, an increase rather than a decrease would have been reported. That's important because traders bet billions of dollars based on those numbers. ''They've revised the weekly data, but you don't go back and revise the market,'' said Bill O'Grady, vice president, director of fundamental futures research, at A.G. Edwards & Sons in St. Louis. While the revisions weren't enough to prevent oil from ending the week little changed, closing at $20.53 a barrel Friday, they show how inaccurate the weekly snapshots of inventories can be and how dependent traders are on them. For the DOE, author of the world's most highly regarded energy statistics, this was the first time in recent memory that the department had altered a report from a previous week. Inventory Changes ''I am always skeptical, but I think we have a real good handle on the crude inventories right now,'' said John Cook, who's in charge of the statistics division for the DOE's Energy Information Administration. ''We had underreporting with some major oil companies, and we think we've got the situation under control.'' The inventory changes came after some storage companies said the statistics were wrong and suggested the numbers may have been intentionally misstated to foster the perception that crude oil supplies were dwindling. The DOE denied that they had purposely understated the size of the nation's oil stockpile. The government requires that all U.S. firms with oil in storage, including oil companies, refiners and pipeline companies, report inventories to the DOE on a weekly basis. The individual reports are kept confidential, though a tally that's published weekly is widely watched in energy markets. Computer Problem The department made the changes to its statistics last week after an unusual one-week lapse in releasing inventory figures. The DOE blamed the delay on a computer software problem, a reason that was greeted with skepticism by oil traders. Traders' suspicions were confirmed when the department added about 4 million barrels to their crude oil inventory report covering the week ended July 2, and almost 7 million for the week ended July 9. Had they been reported correctly at the time, the tally would have showed inventories rose 3.4 million barrels to 330.1 million by July 9 from 330.4 million on June 25, instead of the 3.4 million-barrel decline it reported. ''The DOE is really screwing up their credibility,'' said Phil Flynn, senior market analyst at Alaron Trading Corp. in Chicago. ''One week their computer is tied up then they go back and change the numbers. They better get their act together.'' The changes were buried in figures released last Tuesday. While traders said the revisions illustrated the problem they have in interpreting the department's figures, the DOE said it was just business as usual. ''The numbers are going to fluctuate weekly, they're going to zig-zag,'' Cook said. ''If you look at the quarterly average, that's the best way to get a real trend.'' Weekly Reports Still, the world's oil traders say they can't wait for the quarterly average. They watch the most recent changes in the U.S. for indications of world supply and demand. Those changes are reflected in the DOE report every Wednesday and in one issued the previous day by the industry-funded American Petroleum Institute, which relies on voluntary inventory reports from its members. The weekly DOE statistics became known as the wobble because while the trend is accurate, each weekly snapshot of statistics tends to exaggerate changes in inventories, Cook said. Figures can be altered dramatically by one mistake: counting an extra oil tanker or by missing a storage tank. The DOE's early-July revisions erased four weeks of declining inventories, which had been taken as a sign that a supply glut of almost two years ending. Crude oil prices rose 25 percent from May 31 until July 19 amid perceptions that world oil producers were succeeding in their plan to cut production, and the rally's foundation was the falling inventory numbers. Mike Conner, the DOE survey statistician who compiles the numbers, said the one-week delay helped make the figures more accurate. ''Having another week to do it certainly helped,'' Conner said. Errors in surveys ''happen every week.'' If errors are apparent, ''you try to contact the companies and get those resolved,'' he said.