Oil stocks and price changes by est120

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Oil stocks and price changes

POSTED BY: EST120
UPDATED: Tuesday, May 30, 2006 21:09
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Wednesday, May 24, 2006 6:42 AM

First, let me say that I am rather ignorant when it comes to things like this, so perhaps someone can set me straight. Every week, the Energy Information Administration (EIA) estimates how much the level oil or gasoline inventories have changed in the past week. When the actual numbers are released, there is a reaction in the price of oil and gas, either a drop or an increase in price (usually an increase these days, it seems).

My confusion stems from the fact that it seems like the EIA estimates are almost always seem way off. Today's comparison says that oil stocks dropped by 3 million barrels while the EIA predicted 800,000 barrels. Not only that, gas inventories ROSE 2.5 million barrels but the EIA predicted a DROP of 400,000 barrels. It seems like this happens almost every time. Is predicting the fluctuations in these stocks just incredibly complicated? Is it pointless to even try to predict this? Am I making too big a deal of out it? Are discrepencies like this rarer than they seem to be?

What seems to happen, from my perspective, is that the EIA predicts something rather benign, a drop of perhaps 500,000 barrels in crude stocks. The oil market says "That is not so bad" and prices are steady. Then the real numbers come out, stocks really dropped 2 million barrels. The market freaks out and prices jump (a lot usually) like investors are saying "You told us there would only be a small drop!". Not that it is the same thing, but if the EIA predicted the 2 million barrel drop and the stocks actually did drop closer to 2 million barrels, would the market react as violently even if the drop is rather large?

Can someone please set me straight?

Not trying to incite any arguements, I am just confused and a little frustrated, perhaps for no reason.

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Tuesday, May 30, 2006 9:09 PM

STDOUBT

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I am just confused and a little frustrated, perhaps for no reason.

You're right where they want you...
"The Spice must flow..."

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