What Are The EIA Oil Production Numbers Telling Us?

How fast is US oil production slowing?  That is The Big Question that oil bulls are asking right now.

That—and some wildly different EIA data—make this question very timely right now.

You see, the monthly and weekly EIA oil production data are showing growth at two very different speeds.  The weekly numbers intimate growth is barely slowing at all, while the two-month delayed monthly numbers (EIA 914 report) show production slowing a lot.

For the monthlies, an investor could reasonably argue the rollover in US shale production is already happening.

For investors, it’s a $100 billion question.  The weekly numbers say don’t buy oil stocks yet; red light!  The monthly numbers are saying buy now; green light!

Weekly vs. Monthly

The EIA is the Energy Information Administration based out of Washington DC.  You can learn all about them here.

The EIA Methodology

Every week the EIA estimates oil inventory, imports, exports and production to give the public a full picture of what happened over the previous week.

If you talk with the EIA or dig into their methodology, one thing becomes clear: they have a much firmer grasp on inventories than any of the other numbers they provide.

Every week the EIA surveys for inventory.  In addition, there are third party data providers like Genscape that make inventory estimates from thermal cameras, satellite images and other innovative techniques.

What it means is that EIA has a lot of confidence in their inventory number.  They know it’s in the ballpark and are confident which base it’s on.

The production numbers on the other hand….

Weekly production is estimated from the latest available production data from Alaska and a whole bunch of short-term forecasts for the rest of the country.

Those short-term forecasts come from the STEO, or Short-Term Energy Outlook, an EIA modeling exercise which is notoriously inaccurate.

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