Between the two crude oil inventory reports that are released each week—one from the American Petroleum Institute (API) and the other from U.S. Energy Information Administration (EIA)—the EIA report is often more highly regarded.
Why Crude Oil Inventory Reports Matter
The weekly update on the number of crude oil inventories in the U.S. is one of the most important pieces of data regarding the oil market. Oil traders and analysts closely watch changes in inventory levels and use them in their analyses and expectations for oil prices. That's because oil inventories serve as a proxy to oil demand.
If crude oil inventories increase weekly, it indicates that demand for oil is falling short of supply. If the oil inventories data shows a decline in oil inventories, it indicates that demand is surpassing supply. With the supply and demand balance one of the most crucial facts in a commodity's price, this inventory data has a direct impact on oil prices. Live oil prices often swing dramatically when the week-over-week change in oil inventories is significantly different from what analysts forecast.
API and EIA Reports
The API is an industry group that represents American companies involved in producing, refining and distributing petroleum and petroleum products.
The API produces the Weekly Statistical Bulletin, which reports on refinery operations and production of the petroleum products that account for more than 80% of total refinery production. Crude oil inventories are included in this report, which is released on Tuesdays at 4:30 p.m. ET. After a Monday holiday, it's released on Wednesday.
The EIA is an independent, impartial organization that collects, analyzes, and disseminates energy information in the U.S.
The EIA publishes the EIA Weekly Petroleum Status Report on Wednesdays at 10:30 a.m. ET, but after a Monday holiday, it is released on Thursday at 11 a.m. ET. The EIS report provides information on the supply of oil and the level of inventories of crude oil and refined products.
Data Collection Methods
The EIA requires major oil companies to complete their oil inventory surveys. The EIA surveys include a stern disclosure for noncompliance or intentional wrongdoing, and there are civil and criminal penalties for failure to file accurate and timely data.
The American Petroleum Institute collects that data “at will,” but according to the API, the average sample coverage of its data is about 90%. The stern disclosures the EIA data includes have analysts and traders believing that the EIA’s data is more accurate than the API’s.
The API data is often seen as a prelude to the EIA data, as it's released the evening before the EIA report. There seems to be a relationship between the two data sets: 80% of the time the data is directionally aligned.
While the data is often similar, at times there have been large discrepancies. For example, on Jan. 9, 2018, the API reported that weekly crude oil inventories decreased by 11.2 million barrels, but the following day, the EIA reported a decrease of 4.9 million barrels.
Due to the strictness and impartiality of the EIA collection, it is often relied upon in higher regard. However, traders have been relying on the API data for a longer period. Since 1929, the API has been reporting oil inventory data weekly. The EIA started releasing its weekly inventory report in 1979.