U.S. Says Its 1998 Oil Demand, Supply Estimates Inaccurate

By George Stein Bloomberg News | THE JOURNAL RECORD, March 11, 1999 | Go to article overview

U.S. Says Its 1998 Oil Demand, Supply Estimates Inaccurate


George Stein Bloomberg News, THE JOURNAL RECORD


WASHINGTON -- A federal agency whose estimates help determine the price of oil says it underestimated U.S. demand and overstated U.S. production for much of 1998.

The Energy Information Administration, part of the Department of Energy, underestimated U.S. annual oil demand by 142,000 barrels a day, or 0.7 percent, from January through September, according to revised government figures. It overestimated U.S. output by 66,900 barrels a day, or 1.1 percent, through November.

While the errors were not large in percentage terms, oil prices can swing widely based on small movements in supply and demand. Prices, which fell to record lows during the year, were probably lower than they would have been had the federal estimates been correct, industry observers say. "The sharp drop in oil prices was due mainly to fundamentals, but also in part to market psychology," said Lawrence Goldstein, president of Petroleum Industry Research Foundation Inc. "Had this (the inaccurate estimates) been known earlier, it would have had a moderating effect." If the errors were made for all of 1998, demand was understated by 50 million barrels, and production overstated by 24.4 million. Final figures for the year weren't immediately available. The EIA blames the inaccurate estimates on incomplete reports by U.S. oil companies struggling with economic turmoil caused by the lowest inflation- adjusted oil prices since the Great Depression. Changes in staff and operations because of mergers and firings made it more difficult to get timely and accurate responses to its queries, the EIA said. Low oil prices have brought a wave of consolidation to the industry. The inaccurate estimates may be part of the answer to the mystery of the "missing barrels" of 1998. Throughout the year, oil analysts and traders were puzzled that global oil production, consumption and inventory figures left 300 million barrels of oil unaccounted for. Industry experts debated whether calculations were inaccurate, or if the missing oil was in storage in ships floating offshore or in tanks in producing countries. If the missing oil had eventually flooded the market, it would have further depressed prices. In addition to demand statistics, the government's initial monthly estimates of how much oil and fuel were in storage in the United States also were incorrect, said Ronald O'Neill, chief of the Energy Information Administration's Survey Management Team. …

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