The crude oil adjustment is perhaps the most frequently misunderstood component of the U.S. crude oil balance published in EIA’s Weekly Petroleum Status Report (WPSR). This adjustment reflects the combined uncertainty around each of the crude oil data elements that EIA uses to assess the balance between U.S. crude oil supply and its disposition.
Key weekly crude oil quantities are linked through the following balance relationship:
Domestic Production + Imports = Refinery Inputs + Exports + Stock Change,
with stock change defined as the difference between stock builds and stock draws.
Each week, EIA collects survey data for imports, refinery inputs, and stocks. Currently, EIA does not collect weekly production or export data, so estimates are developed based on monthly data and information regarding seasonal and industry trends. The quality of these estimates can later be assessed by examining their relationship to monthly data once it becomes available. The differences between weekly and monthly values after the latter are obtained are typically quite small compared with the estimated production and export volumes. For example, for the weekly crude oil production estimate, EIA’s model is often within 1% of the monthly reported production data for volumes that now regularly exceed 9 million barrels per day.
Despite the generally close correspondence between weekly production and exports estimates and subsequent monthly data, EIA is seeking to further improve weekly data. A recent agreement between EIA and the Department of Homeland Security’s Customs and Border Protection will provide EIA analysts with access to raw export data on a weekly basis, potentially enabling even more accurate weekly crude oil export data.
Ideally the sum of the elements of the crude oil balance relationship, which are developed independently, should balance perfectly. In practice, this is rarely the case, because timing differences or other factors that contribute to survey responses may not precisely reflect actual crude oil import, storage, and refining activity for the week, or weekly estimates of crude oil exports and production over- or under-estimate the actual values.
For this reason, EIA derives an adjustment equal to the sum of disposition items minus the sum of supply items that may reflect, in part, potential imperfections in respondent reporting. Typically, the adjustment is less than 2% of refinery crude oil inputs. Because this calculation can fluctuate between positive and negative values, a four-week or eight-week average adjustment is often even smaller than 2%.
Compared to the millions of barrels in the overall balance, the adjustment is quite small, and it generally demonstrates a good match between the various components driving crude oil supply and use.