US Oil Demand Is Far From Perfect And More Data Is Needed
According to the latest EIA report, US implied oil demand dropped 1.744 million b/d week-over-week. This now puts US oil demand 4.1% below last year's 4-week average.
On the surface, for those that are not accustomed to the usual volatility in the EIA data, this looks exceedingly bearish. But from our experience (and we, unfortunately, have a lot of it), EIA has "moments". We've been tracking EIA data for so long that we can usually tell when something is off. In this case, we've noticed since the EIA restarted publication (following the outage) that the crude data was off.
One way we can tell this is by tracking the physical movements of tankers (imports and exports). EIA publishes a weekly adjustment figure accounting for the unaccounted crude oil. We use that, modify it based on physical movements in tankers, and derive the "modified adjustment."
The last 2-weeks, in particular, showed an above-average modified adjustment of over 1 million b/d. The implied US oil production, as a result, shot up to the highest level since COVID started.
But following the EIA PSM report that showed a flat US oil production profile for April, we knew the data was likely off (the weekly data). If there was no spike in US oil production, then it's likely a data issue, and this week's data confirmed it as such. You can see the dramatic decrease in modified adjustment.