OPEC has shifted the goalposts for assessing an overhang in oil inventories, giving the group more room to prolong production cuts, while analysts warn the move will offer a distorted view of market conditions.
Ever since the Organization of the
Petroleum Exporting Countries and allies led by Russia - a
grouping known as
OPEC+ - started curbing oil output two and a half years ago, they have targeted
bringing oil in storage in the industrialized world in line with the five-year
average.
In OPEC’s view, eliminating
the glut in inventories would achieve a balanced oil market.
Earlier this month, Saudi
Energy Minister Khalid al-Falih said OPEC was using the period 2010-2014 as one
metric to assess the success of its oil cuts.
Including this new metric
would be a shift away from the more recent five-year average of 2014-2018, which
the International Energy Agency (IEA), and OPEC itself, had used to gauge
market conditions.
“2010-2014 is probably
another end of the spectrum and we will be looking at a collection of metrics
that would give us guidance on what to do next after the nine months are over,”
Falih said, referring to when supply curbs end in March 2020.
He said the next meeting of
the OPEC+ ministerial monitoring committee in September would look at stocks in
terms of cover for future demand, and how much of those stocks was in pipelines
and tank heels - referring to oil residue below a tank’s suction pump.
Two OPEC sources said
2010-2014 would be the main metric for measuring inventories.
They said the rationale was that the 2010-2014 average preceded 2015-2016, when
inventories rose at unprecedented levels and when OPEC, led by Saudi Arabia,
boosted output in a fight for market share against shale and other
producers.
(For a graphic
on 'OECD Oil Inventories click tmsnrt.rs/32AMyYV)
“This is a new perspective
suggested by OPEC. We have our own perspective,” IEA chief Fatih Birol told
Reuters.
“The important thing is that
you can change the methodology but you cannot change the realities of the
market,” he said.
OECD stocks in May were 220
million barrels above the five-year average in 2010-2014, according to the most
recent monthly report from the IEA, which represents economies that are part of
the Organisation for Economic Cooperation and Development.
In comparison, the overhang
in May above the five-year average of 2014-2018 stood at only 6.7 million
barrels, the IEA said. OPEC’s own figures suggest the May glut was at 25
million barrels above the 2014-2018 average.
“It’s basically telling
everyone we will continue (oil supply management) for a while,” one of the OPEC
sources said.
(For a graphic
on 'OECD Inventories OPEC' click tmsnrt.rs/2Obb7ss)
- Reuters
No comments:
Post a Comment