Ferguson's Forecast: Correcting ?Official? Natural Gas Data

Gas markets pay close attention to the weekly change in gas storage levels reported by the U.S. Energy Information Administration. Readers may recall that the level reported the day before Thanksgiving was erroneously low, and the price of December contracts jumped $1.18/MMBtu, nearly 20 percent. To make matters worse, that was the last day of trading in the contract. And the last price is used as the basis for many deals. An estimated $1 billion changed hands because of the erroneous number reported by EIA. Compounding the error was an EIA policy not to issue corrections until the release of the following week?s report. The Federal Energy Regulatory Commission reported the results of its investigation of the fiasco this week. EIA bases its reports on data received from gas storage facility operators, and the error was caused by Dominion Transmission, which sent EIA the wrong data file. After looking at Dominion?s trading affiliate?s records, FERC concluded that the error was accidental and that Dominion?s traders had no improper advance knowledge. This seems reasonable, since the error was so obvious. Surely market manipulators are smart enough to cover their tracks better than that. In the aftermath, EIA asked for input on how it should issue corrections. FERC recommended that corrections of more than 7 billion cubic feet be made promptly upon discovery, after giving two-hour notice to the markets via their e-mail distribution list. This seems like a reasonable improvement, but what puzzles me is why the EIA bureaucracy issued a report that was so obviously erroneous. Many analysts noticed the mistake immediately, including yours truly reporting in Energy Circuit the following Monday. Were no eyebrows raised at EIA? If so, why didn?t the report at least have an asterisk noting that it was under review? Is nobody at EIA paying attention? Procedures to correct reporting mistakes are all well and good, but they are no substitute for adequate quality control to ensure that the mistakes aren?t made in the first place.

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Ferguson’s Forecast: Correcting ?Official? Natural Gas Data

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