Consultant reverses US output estimate

OREANDA-NEWS. May 13, 2015. A consultant who yesterday claimed the Energy Information Administration (EIA) was greatly exaggerating US oil output has reversed himself, saying the EIA is actually underestimating output.

Industry consultant Phil Verleger used volumes derived from inventory data, refinery runs, imports and exports to show an average EIA production under-estimation of 65,000 b/d for February through April, and an error of 132,000 b/d fewer barrels for November through April.

"Apparently, the US produced more than the amount the EIA reported," Verleger said.

This is a reversal of claims Verleger made yesterday in a harshly worded note where he claimed EIA had overstated production by 1.1mn-1.694mn b/d and called for the dismissal of the agency's head. The allegedly inflated numbers explained why oil prices have rallied but inventories have not built as much as expected, Verleger said.

The error in Verleger's original analysis was pointed out to him by economists at the Federal Reserve, he said.

"To be blunt, we screwed up," Verleger said on his company's website.

The EIA said it was confident in the quality and validity of its production data, and that its work was based on official state oil and gas figures.

"Simple analysis shows that the claim of a massive understatement of production is extremely unlikely. A correct balance equation for crude oil requires that refinery crude oil use + crude oil exports - crude oil imports + the change in crude oil stocks must equal production," the EIA said.

Verleger's original report — now corrected — used the equation of the change in crude stocks minus refinery runs plus imports minus exports.

The EIA said it was confident that its estimates for crude exports "certainly aren't off by hundreds of thousands of barrels," and that since it collects data on refinery crude runs, changes in crude stocks and crude imports on a weekly basis "production cannot be overestimated by 1-1.6mn b/d as alleged."

The agency recently began collecting oil production data directly from operators and has been following production trends in tight oil plays through its monthly Drilling Productivity Report.