Global inventories of crude oil declined by 45 million barrels in August after a 34-million-barrel reduction in July, Russia’s Energy Minister Alexander Novak said in a TV interview.
"Reserves accumulated in the second quarter are gradually shrinking, and we see that July and August were the first two months when stocks declined gradually. The reduction roughly amounted to 45 mln barrels in August and 34 [mln barrels] in July," Novak told Rossiya-24.
In more good news, Novak said that he expected oil demand to recover fully from the effects of the pandemic by the second quarter of 2021. Even now the oil market is in a supply deficit, amounting to between 1.5 and 2 million bpd, which is helping to reduce inventories, the official said.
While Russia’s top oil man appears to be optimistic about the future of the oil market, his Saudi counterpart has taken a different stance, sending a stark warning to speculators who might want to make a profit on that market.
“Anyone who thinks they will get a word from me on what we will do next, is absolutely living in a La La Land... I’m going to make sure whoever gambles on this market will be ouching like hell,” Abdulaziz bin Salma told reporters at yesterday’s OPEC+ meeting, as quoted by Reuters.
To short-sellers in particular, Prince Abdulaziz, who is the brother of Crown Prince Mohammed, had a message from Dirty Harry: “Make my day.”
Before that, Abdulaziz lashed out at OPEC laggards, warning them full compliance with the production cuts was “not a charity”.
OPEC+ ministers met yesterday to discuss the progress of their production cut agreement and next steps. As in previous meetings, the ministerial committee insisted on better compliance, even though the rate for August reached 101 percent. The cut target remained unchanged at 7.7 million bpd. If Russia’s Novak is right, that should be enough to see a return to balance on oil markets as demand recovers. Not all, however, agree it will, now or ever.
By Irina Slav for Oilprice.com
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According to Vitol, inventories have already declined by 300 million barrels in the last three months and are projected to decline further by 250-300 million barrels between September and December.
This comes as a rebut to earlier gloomy projections by both the International Energy Agency (IEA) and OPEC+.
It will also help accelerate the rise in oil prices to a projected $45-$50 a barrel this year and $60 in early 2021. Moreover, the global oil market according to my research will end 2020 at 96 mbd, just 5 mbd short of 2019 level.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London