US EIA to enhance energy forecasts with financial data

09 September 2009 16:05  [Source: ICIS news]

HOUSTON (ICIS news)--The US Energy Information Administration (EIAsaid on Wednesday it will expand its data collection to include financial market influences on energy prices in its forecasts.

Beginning in October, the agency's short-term oil and natural gas price predictions will include a quantitative measure of price uncertainty in the form of confidence intervals, based on information from futures and options markets.

The EIA has already tested its model for quantifying the degree of uncertainty in the forecasts and submitted it for peer review, spokesman Jonathan Cogan said.

"We feel pretty confident that we will be using a legitimate and recognised methodology," Cogan said.

The EIA will obtain data from the Commodity Futures Trading Commission (CFTC) and other government agencies for its expanded publications.

Information from private sources such as price reporting agencies might also be considered as the enhancements are developed, Cogan said.

The goal of increased market transparency complements the CFTC's own efforts to improve the information available to energy market participants and the general public, amid political pressure to stamp out price manipulation.

The EIA initiative was signalled by the EIA's new administrator, Richard Newell, during his confirmation hearings before Congress. Newell was sworn in on 3 August.

Beyond the fundamentals of supply and demand, the EIA "must also assess other influences, such as speculation, hedging, investment, and exchange rates, as we seek to fully understand energy price movements", Newell said in a statement on Wednesday.

The agency has formed an energy and financial markets analysis team to collect information on factors affecting energy prices, analyse market behaviour, solicit feedback from experts on the inter-relationship of energy and financial markets, and coordinate with other government agencies.

The EIA will publish a notice in November seeking public input to identify the best data on physical inventories, prices, and market activity. It will also expand its collection of commercial oil and refined products storage capacity data, beginning in early 2010, to replicate its existing data on natural gas storage capacity.

The agency will also seek comment on whether it needs to include additional data in its semi-annual refinery outages report.

Over time, the EIA will develop analytical reports that identify factors potentially influencing energy prices, including consumption, production, inventories, spare production capacity and geopolitical risks.

"Initial analysis will pay particular attention to the recent period of price volatility and will be the starting point for identifying gaps in information and analysis, which will form the basis of EIA’s longer-term analytic agenda," the agency said.

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By: Stephen Burns
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