NEW YORK, Oct 14 (Reuters) - When the U.S. Energy Information Administration turned off the lights on Friday due to the government shutdown, energy traders’ view of the world’s biggest oil market suddenly dimmed significantly - but it won’t fade to black.
Next week, for the first time since it was started in 1979, the EIA’s weekly report on the production, use and inventory of fuel and crude - the single most closely watched set of data in the global oil market - will not be published. After operating on rainy day funds since the Oct. 1 partial government closure, the agency has finally run out of money, forcing it to shut.
The EIA’s U.S. natural gas inventory data, typically released a day later, will also be absent. If the shutdown drags on, there will be none of the more exhaustive monthly data that usually underpins many an analyst’s spreadsheet.
In an official sense, the world’s biggest and most transparent oil market will become more opaque than China, the country that has just overtaken the United States as the biggest net importer of oil. From Beijing, only broad monthly data on refinery production and trade is available.
“It is unconscionable that we are making this market less transparent, it is already opaque,” said Jan Stuart, head of Global Energy Research of Credit Suisse. “It’s crazy.”
But as with other financial markets that have already muddled through two weeks of data darkness, oil traders will find a host of private enterprises eager to help fill the information void, highlighting the rapid growth of proprietary intelligence providers seeking to get a jump on official data.
These firms are on a marketing spree to fill the gap, offering products temporarily to entice new clients. Data such as gasoline imports and stockpiles in Cushing, Oklahoma - normally available ahead of the official figures for a sizeable fee - will be released for free in the weeks ahead.
But none of them offer a suite of products that match the exhaustive set of data distributed by the EIA, based on information that oil and gas companies are required to provide the U.S. government.
Analysts say speculators, fearing that they may put on positions that could be proved horribly mistaken when the EIA data is released again, will reduce positions in the market.
But no one can say for sure - the Commodity Futures Trading Commission has stopped producing a weekly report that normally details speculator activity.
Collecting the weekly oil inventory data is a major task undertaken by up to five EIA analysts and 20 contractors during any given week. The weekly data samples 90 percent of the oil inventory volume held by 70 to 80 top oil companies as reported in the EIA’s monthly data.
Operators have until 5 p.m. on Monday to submit their forms covering their operations during that week either through email, a business-to-business system not linked to the Internet or via fax. Dozens of data points are collected through series of forms that differ by operator.
As the data comes in, the team inspects it for anomalies and corresponds with companies to correct errors or validate figures that their system flags. They then discuss it, use ratios to “gross up” the sample in order for it to reflect more than just 90 percent of the volume and put it in the system for publication at 10:30 a.m. EDT on Wednesday.
The EIA sent a letter to operators on Friday afternoon, asking them to continue to submit data despite the shutdown. The agency will not, however, be able to communicate with those operators if there are any problems with the data submission, nor is it clear when the data will be released once the shutdown ends.
“We are not making any decisions yet on when we will resume the release,” said Douglas MacIntyre, director of the EIA’s office of petroleum and biofuels statistics.
While there is no viable substitute for much government data that depends on proprietary data, which is impossible to replicate such as non-farm payrolls and industrial output, the oil market does have a fall-back: the industry-funded American Petroleum Institute.
The API report, which is based on voluntary submissions covering the same type of data that the EIA collects, is typically released at 4:30 p.m. a day ahead of the EIA report, but has often been criticized for being less accurate.
In the absence of an EIA benchmark, however, the API’s weekly report, which started in 1929, will take on more prominence. Some traders said the group’s decision earlier this year to begin charging users a premium rate for real-time access to the report seemed well-timed.
“They’re going to be the only game in town,” said Phil Flynn, analyst at Price Futures Group in Chicago.
There is no equivalent to the API for natural gas. The American Gas Association produced a weekly storage report from 1994 to 2001, but discontinued it due to “resource considerations” and has no plans to resurrect it.
“Traders will look for substitutes from private data providers,” said Tom Saal, senior vice president at INTL FCStone in Miami, adding: “Privately-produced data does not capture the entire market. Not everyone has access to that data, so I don’t expect to see a lot of volatility in prices.”
Over the years, a handful of private companies have also unveiled products to either pre-empt the EIA’s reports or to provide more accurate data, focusing on deep niche data rather than breadth. With the U.S. oil market in the midst of an unprecedented boom, the appetite for data has only grown as traders and analysts look for an edge in explaining how trade flows are adjusting to cope with new production.
“We have definitely seen increased demand for our products over the past two years, and it’s accelerated even more in the past couple days,” said David Francoeur, Chief Marketing Officer for energy intelligence provider Genscape, which uses infrared cameras, helicopter fly-overs and other observational analytics to calculate data on inventory levels at key oil hubs, refineries and in pipelines.
Among the data it offers, Genscape monitors tank levels at the most closely watched oil hubs, including the Cushing, Oklahoma, delivery point for the U.S. oil futures. Next week, the company plans to release its Monday morning Cushing inventory number to the market on Thursday.
Clipper Data, a firm that uses customs data and ship tracking to estimate seaborne imports of crude and products, will also be releasing a report on U.S. oil import data for the East Coast, Gulf Coast and West Coast on Tuesday.
“The pipeline and infrastructure reporting services like Genscape, their data will become all the more important and we’re just going to have to more closely monitor, on our own, refinery snags or slowdowns,” said John Kilduff, partner at Again Capital LLC in New York.
“It all just got a bit harder.” (Additional reporting by Joseph Silha, Eileen Houlihan, Anna Sussman and Jeanine Prezioso; Editing by Ken Wills)