Explaining oil numbers

Every Tuesday afternoon, the American Petroleum Institute (API) releases crude oil inventories. Every Wednesday morning, the Energy Information Agency (EIA), which is part of Department of Energy (DOE) releases crude oil inventories.

This week, the two numbers were more than four million barrels apart. One had oil prices selling off, the other had oil prices rallying. Two different sources -- two different numbers…but what's the difference?

Here's a brief primer.

The API is a national trade organization for the U.S. energy industry. It has 400 members from the largest oil company to the smallest independent. Its "mission is to influence public policy in support of a strong, viable U.S. oil and natural gas industry." It also collects data on supply and demand for energy products and releases that information in its weekly statistical bulletin.

The EIA has a similar mission. The EIA "collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding."

The differences in their numbers can be caused by -- among other things -- different respondents to a survey, different estimates of those who haven't responded, different benchmarks which get periodically adjusted and different judgments on questionable data.

Sometimes the differences between the two data points can be large or small and sometimes with different signs (draws versus inflows, for example). But those who follow these things suggest that over time, the data are closer to one another than not - directionally speaking. But also, because the markets' reaction can be unpredictable and the differences between the number isn't necessarily predictable from week to week, it is difficult to consistently trade between the two different reporting times.

So it might be a matter of pick your poison and consistently use it, but always be aware of the other number.