A year and a half on from OPEC’s original deal to limit output, the surplus oil stashed in storage tanks around the world are nearly back to average levels. However, by all indications, OPEC is not ready to ease up on the production caps, with top officials signaling a desire to keep the cuts in place into 2019.
But that might require changing of the definition of a “balanced” oil market. OPEC has consistently held up OECD inventories as the metric upon which it was basing its calculations. The goal was to drain inventories back down to the five-year average. With OECD inventories about 44 million barrels above that threshold in February – down from a roughly 300-million-barrel surplus at the start of 2017 – the goal will likely be achieved at some point this year, perhaps in the second or third quarter.So, let's see if we can find a graphic of the historical global crude oil inventory.
From the EIA:
- inventories are right in the "middle" with data going back to 2013
- something no one talks about: inventories were at historic lows (2013 - 2019) in late 2014 just before the Saudi Surge (announced November, 2014) and did not drop again until Saudi ended the surge (announced November, 2016) -- it makes me wonder about the Saudi Surge all over again -- why and what it really meant
- once the Saudi Surge ended, OECD inventories dropped but, shoot, they are still right in the middle of the range, and projections by the EIA suggests inventories will rise, not fall
- many feel the EIA is too conservative with shale estimates; if so, their projections may be low
- the graphic is pretty impressive -- but something I never seem to hear anyone talking about: days of inventory -- look at that x-axis -- two things are noted
- the range is very narrow -- fifty-five to sixty-five days (2013 - 2019)
- EIA estimates that by January, 2019, less than a year from now, days of supply will actually increase