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‘Global oil inventory developments’, OPEC Featured Article, November 14, 2022

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FEATURED ARTICLE

Global oil inventories consist of three major components. The first component is the total OECD oil stocks, commercial and Strategic Petroleum Reserves (SPRs), with OECD national government reporting systems providing data on their inventories. The second major component is non-OECD inventories, which have grown in importance in recent years as rising non-OECD oil demand which has surpassed OECD oil demand levels requires more stockpiling in these countries. Unfortunately, inventories in the non-OECD are hard to track due to incomplete data or the lack thereof. In the absence of regularly reported data, estimates are arrived at using information released by companies and ministries, as well as figures published in the Joint Organisations Data Initiative (JODI) database, which features official country data. The final component is oil at sea, which has increased in recent years, providing an important operational link between exporting and consumer countries.

Global oil inventories have increased since the beginning of this year by 158 mb and stood at 8,096mb at the of September 2022. OECD commercial stocks, non-OECD stocks and oil at sea witnessed stock builds, while SPRs in the OECD registered significant stock draws.

Over this period, total OECD commercial stocks have increased by 98 mb. At the same time, non-OECD stocks and oil at sea rose by 111 mb and 184 mb, respectively. By contrast, SPRs were expected to register a significant draw of 236 mb over the first three quarters of this year, with the bulk coming from the US, amounting to a planned 176 mb followed by OECD Europe drawing some 31 mb and OECD Asia Pacific 29 mb. These volumes are estimated to consist of 208 mb of crude and 28 mb of products, notably gasoline and middle distillates.?
In 1Q22, global oil inventory levels continued the declining trend observed since late 2020, as total oil demand outpaced global oil supply by 0.3 mb/d (Graph 2). However, this trend was reversed in 2Q22 and 3Q22, as global oil supply outpaced total oil demand by 0.2 mb/d and 1.1 mb/d, respectively. This underlines the apparent move from a balance deficit to a surplus in terms of oil supply.

During the first three quarters of this year, the observed global oil stock build reflected that the global oil market saw a supply surplus of around 0.3 mb/d vis-à-vis total world oil demand. This supply surplus was confirmed by low crude refinery runs, which are an indicator of oil demand performance. The drop in oil demand occurred on the back of weakening economic activity, spurred by rising inflation, monetary tightening by major central banks, aggravated geopolitical tensions, tightening labour markets and additional supply chain constraints.

The significant uncertainty regarding the global economy, accompanied by fears of a global recession contributes to the downside risk for lowering global oil demand growth. In addition, China’s strict adherence to the “zero COVID-19 policy” adds to this uncertainty, making the country’s recovery path even more unpredictable. To address this significant uncertainty and heightened market volatility, the proactive and preemptive decisions taken by the OPEC and non-OPEC producing countries in the Declaration of Cooperation (DoC) will continue to contribute to global oil market stability.




Mrs. Smith