Global oil inventories, which serve as a tangible measure of the oil market balance, are grouped in three major components. The first group is OECD’s commercial oil stocks and Strategic Petroleum Reserves (SPR). Clearly, the OECD commercial stocks serve as a key indicator of the status of the oil market balance, as they are frequently published by national government reporting systems, and as the seasonal variations in the OECD commercial stock levels are linked to oil demand through an inverse relationship. The second major group is the non-OECD commercial inventories and SPR, which have become more important in recent years as non-OECD oil demand has increased, taking a higher share than the OECD in total world oil demand and requiring more stockpiling. However, inventory levels in the non-OECD are hard to track due to a lack of complete data. In the absence of regularly reported data, stock levels in non-OECD are often estimated using information released by companies and ministries, as well as data published in the JODI database. The final group is oil at sea, which includes “oil afloat” and “oil in transit”.

In the 2Q20, the global oil market saw oil supply heavily outpacing world oil demand, leading to a drastic surge in global oil inventories, within a short span of a couple of months. In response to this critical situation, in April 2020, OPEC and non-OPEC oil producing countries participating in the ‘Declaration of Cooperation’ (DoC) announced voluntary productions adjustments commensurate with the huge oil stock surplus, to achieve the rebalancing and stabilization of the global oil market. Since its historic peak in June 2020, global oil inventories have declined significantly. At the end of September 2021 they had fallen by 938 mb, with all components witnessing stock draws. Over this period, total OECD commercial and SPR stocks have dropped by 411 mb and 46 mb, respectively, while non-OECD and oil at sea have fallen by 320 mb and 160 mb, respectively

Moreover, OECD commercial oil inventories, compared to the latest five-year average (2015- 2019), reached a high of around 270 mb in June 2020, clearly reflecting a huge supply excess. This surplus has since declined to a deficit of 163 mb at the end of September 2021, mainly driven by DoC successful efforts to stabilize the market and supported by higher refinery crude runs, which is an indicator of an improvement in oil demand on the back of an economic recovery following the initial impact of the COVID-19 pandemic (Graph 2). Clearly, the global stock draws during the first three quarters of 2021were largely due to efforts of the DoC and a pick up in global oil demand, which outpaced global supply by 0.1 mb/d, 1.5 mb/d, 2.2 mb/d in 1Q21, 2Q21 and 3Q21 respectively. This is equivalent to a total implied stock draw of 342 mb.

With these market developments, the countries participating in the DoC continue their course to increase production starting August 2021, to gradually return the adjusted production volumes by 0.4 mb/d on a monthly basis, until the phasing out of the total 5.8 mb/d adjustment in 2022. The DoC will continue to review the market conditions on a regular basis, reaffirming the participating countries’ commitment to ensure adequate supply and support efforts to maintain global oil market stability.
Source: OPEC