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After hitting a six-year low in September, commercial oil stocks in OECD countries showed a marginal build in October, suggesting that the months of hefty inventory draws globally may be over, the International Energy Agency (IEA) said on Tuesday.
In its closely watched Oil Market Report for November, the agency noted that OECD total industry stocks plunged by 51 million barrels in September, with crude oil and middle distillate accounting for most of the declines. Europe led the stock drawdowns in September when total OECD industry stocks stood at 2.762 billion barrels, which was 250 million barrels below the five-year average and the lowest level since the start of 2015, the IEA said.
Due to the large global inventory decline in September, benchmark crude oil prices surged by $9 a barrel to fresh highs above $86 a barrel for Brent and $84 per barrel for WTI Crude, the IEA noted.
However, preliminary data and satellite observations of stock changes in October point to a marginal stock build and suggest the tide might be turning, the Paris-based agency said.
An increase in global oil supply by the end of the year—led by the United States, Saudi Arabia, and Russia—could mean that the price rally may find some relief in the coming weeks, the IEA said.
Expectations of oil market surplus within just a few months have kept the OPEC+ group from boosting supply more than the monthly increases of 400,000 bpd.
Despite the calls to boost supply to tame high prices, OPEC+ is likely to continue easing the cuts with the gradual pace it set in July as it expects the oil market to tip into a surplus as soon as the first quarter of 2022, the UAE’s Energy Minister Suhail al-Mazrouei told Reuters on Monday.
In a separate interview with Bloomberg, the UAE’s energy minister said, “That should be enough,” referring to the monthly easing of the cuts.
OPEC’s de facto leader and the world’s largest oil exporter, Saudi Arabia, also signaled—through its Energy Minister, Prince Abdulaziz bin Salman—that the pace of the easing of the cuts should be enough as a surplus is coming early next year.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com