Wednesday, December 3, 2014

Crude Oil: Seasonal Adjustment (excerpt)

I’m an economist by training. I’ve seen pictures of oil rigs, but never seen one up close. As an economist, I have a tendency to use seasonally adjusted data to analyze the economy. For example, on my website I have a publication titled, “US Petroleum Weekly.” It shows data compiled by the US Department of Energy (DOE) for domestic production and usage, as well as exports and imports. I’ve been using the seasonally adjusted series rather than the unadjusted data compiled by DOE.

One of our accounts noted that the seasonally adjusted production numbers show a decline of 0.4mbd over the past 10 weeks through the week of November 21 to 9.0mbd, while the unadjusted data continued to rise by 0.3mbd to 9.1mbd. The former suggest that the plunge in oil prices may be depressing production already, while the latter suggest that’s not so. The unadjusted data for the key oil-producing states, especially Texas and North Dakota, show production still rising.

I will continue to monitor usage as well as exports and imports on a seasonally adjusted basis. However, I will focus on the unadjusted data for production to assess whether the drop in oil prices is depressing US oil field output. For now, my conclusion is that the US oil industry intends to play the Saudis’ game of chicken.

Today's Morning Briefing: China’s Soft Landing. (1) US oil production still going strong. (2) Saudis’ game of chicken. (3) Secular stagnation in Eurozone weighing on global economic growth. (4) Chinese imports suggest growth weaker than shown by GDP. (5) Emerging markets hard hit by China slowdown. (6) China still dependent on export-led growth. (7) Chinese crude oil demand and railway freight traffic also weak. (8) S&P 500 earnings and revenues remain on bullish trends. (9) Dudley's upbeat outlook. (10) Focus on market-weight-rated S&P 500 auto-related industries. (More for subscribers.)

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