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October 15th, 2013

??EIA Is Now Closed?

by Andrew Price, President & COO

The EIA is now closed. This was the disconcerting subject line in an email I received on Friday October 11th. During my 16 years as an energy consultant, I have come to rely on certain immutable occurrences. The EIA’s weekly updates on oil and natural gas stocks – issued uninterrupted for the past 19 years – has become an important event in the life of this particular energy consultant. Markets often trade sharply higher or lower in response to the EIA reports. What might happen this week without any EIA data at all? Given the deadlock in Washington on funding the US Government, it looks like we are all going to find out.  

The body of EIA’s email clarified that the “EIA is closed due to a lapse in appropriations. EIA will not update its website until the agency reopens. See our notice, “Impact of the federal government shutdown on EIA,” for more details.” 

So what, you ask? Uncertainty tends to send market prices higher so we could see markets move up in response to the lack of official information. Uncertainty will be relatively low this week, but will grow if Washington remains deadlocked for much longer and we move farther away from the last official report from the EIA. 

It is also possible that the lack of EIA data passes us with a proverbial yawn. Many private energy data outlets now compile expected stock levels and associated injection/withdrawal estimates each week. This 3rd party information will continue to be available. 

Still, the EIA sets the standard each week on fuel stocks. The amount that EIA estimates differ from the “expected” number published by private sources can be as influential on energy prices as the absolute change in the fundamentals of supply and demand. Markets realign each week to the official data provided by the EIA.

Accurate storage level information is an important factor in setting “correct” energy prices. An extremely high level of natural gas in storage, like we experienced in the spring of 2012, reduces prices, incentivizing end users to use more of the fuel and producers to slow down on new production. A low level of natural gas in storage increases pricing, incentivizing end users to conserve and producers to start connecting additional wells.

Luckily, reports will only be delayed, not lost (presuming that the government does re-open eventually). The EIA compiles its storage estimates using a weekly survey of industry participants. The EIA has indicated that it will ask survey respondents to continue sending in data. This will allow the EIA to re-create the storage numbers for any week that lost due to the shut-down of the Federal Government.

Whether the markets react with a bang or a whimper, I will be happy with the EIA is back on the job providing the industry with informative and valuable data reporting. With no irony, the EIA email from the 11th provided easy options to “Follow” the EIA on Twitter or “Watch” the EIA on YouTube. Hopefully there will be useful information to follow and watch soon!

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