Commercial oil stockpiles have been rising in recent months in the developed economies in the OECD, pointing to a less tight market than at this time last year, OPEC said in its monthly report on Thursday, less than two weeks after major OPEC+ producers announced additional production cuts until the end of 2023.
"On inventories, OECD commercial inventories have been building in recent months, and product balances are less tight than seen at the same time a year ago," OPEC said in its closely-watched Monthly Oil Market Report (MOMR) today.
The building of inventories could be one plausible backdated reason for the decision of some of the biggest OPEC+ producers to remove another 1.16 million bpd from the market between May and December 2023.
The biggest OPEC producers in the Middle East and several other members of the OPEC+ pact announced early this month a total of 1.16 million bpd of fresh production cuts, which add to Russia's 500,000 bpd cut, which was extended until the end of the year.
Saudi Arabia, OPEC's de facto leader and top global crude exporter, will cut 500,000 bpd and said that the move was "a precautionary measure aimed at supporting the stability of the oil market."
In its report today, OPEC said, referring to the less tight product balances, that "Given these uncertainties surrounding current oil market dynamics, several countries in the Declaration of Cooperation (DoC) have announced additional voluntary adjustments as of May 2023 and until the end of the year, and this was in support of the ongoing relentless and determined DoC effort to support the stability of the oil market."
While increased mobility during the U.S. driving season is set to boost demand for transportation fuels, "any weakening in the economy on the back of ongoing monetary tightening measures by the US Fed may offset some of this seasonal dynamic," OPEC said.
By Charles Kennedy for Oilprice.com
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