Opec-Plus Sees Global Oil Stocks Surging

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Opec-plus now sees global oil inventories rising at a faster rate than it did just a month ago, suggesting that the alliance might need to pause its planned supply increases.

The warning on inventories was contained in an internal report prepared for a meeting of the alliance's Joint Technical Committee (JTC) seen by Energy Intelligence.

However, it reflected an analysis of market conditions before news of a new Covid-19 variant — dubbed Omicron — caused oil prices to fall by almost $10 per barrel on Friday.

A meeting of the JTC had been scheduled for Monday but it has now been pushed back to Wednesday, Dec. 1 to give Opec-plus enough time to digest the Omicron news.

It's therefore quite possible that the latest report may undergo a revision that sounds an even more urgent warning about surplus supply and rising inventories.

Opec-plus ministers are due to meet on Thursday, Dec. 2 to decide if any changes are needed in their current policy of monthly production increases of 400,000 barrels per day.

The report prepared for the originally scheduled JTC meeting showed oil supply exceeding demand by 3 million b/d in the first quarter of 2022 under its base-case scenario (see table).

It shows supply continuing to run ahead of demand by an average of more than 1 million b/d in the final three quarters of 2022, with the result that OECD commercial oil inventories rise to 118 million barrels above their 2015-19 average by the end of 2022.

The shift to a more bearish outlook was driven in part by concerns about rising Delta variant Covid-19 infections in Europe and the strength of the US dollar.

"Worries about the oil demand outlook intensified further after Austria imposed a national lockdown," the report said.

But the most important factor was recently announced plans by the US and other oil-consuming nations to release oil from their strategic petroleum reserves (SPRs).

The report assumed that some 70 million barrels of SPR oil would be released in the first quarter of 2022.

An alternative scenario cited in the report assumed more muted demand and a higher level of non-Opec supply.

That scenario was projected to result in a supply surplus of 4.8 million b/d in the first quarter of 2022, with supply still outstripping demand by 3 million b/d in the second quarter.

The alternative scenario also showed OECD commercial oil inventories rising to 394 million barrels above their 2015-19 average by the end of 2022.

The Impact of Opec-Plus' Base-Case on Inventories
(million bbl)2020Q1'21Q2'21Q3'21Q4'212021
OECD Commercial Stocks3,0352,9212,8792,7632,7572,757
Implied Stockbuild1059-9-132-205-108-442
Supply-Demand Balance (million b/d)2.9-0.1-1.5-2.2-1.1-1.2
Overhang 2015-191097-69-205-170-170
Change From Last Month0-4-4-42-2-2
OECD Commercial Stocks2,7572,8802,9422,9843,0453,045
Implied Stockbuild-44227413892135639
Supply-Demand Balance (million b/d)-
Overhang 2015-19-170-34-616118118
Change From Last Month-22624506969

Oil Supply, Opec-Plus Supply , Inventories
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