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Feature Article

OPEC Monthly Oil Market Report – November 2017


Feature Article

Recent developments in global oil inventories

Over the years 2014 through 2016, global oil inventories grew rapidly, as global oil supply outpaced world oil

demand. During the same period, the crude futures’ forward curve flipped into a prolonged contango for the

first time since 2010, providing an economic incentive to store significant volumes of crude at sea. By

February 2016, OECD commercial stock levels – a key indicator of the state of the oil market – reached at a

record-high of more than 380 mb over the five-year average, indicating the huge excess of supply in the


The landmark production adjustment decision taken by the OPEC and non-OPEC participating oil producing

nations at the end of 2016, known as the Declaration of Cooperation, together with its renewal in May this

year, were necessary responses to the urgent need to bring forward market rebalancing. These

distinguished efforts focused on accelerating the drawdown of the global stock overhang in order to hasten

the return of sustainable oil market stability.

As a result, total OECD commercial stocks saw a

drop of 83 mb in the first three quarters of this year,

compared to a build of 38 mb in the same period last

year and a build of 100 mb compared to the average

level seen in the last five years (2012-2016). In the

first three quarters of 2017, crude inventories have

fallen by 23 mb, while refined product stocks in the

OECD have declined by 60 mb, driven mainly by

improving demand in OECD countries.

In the first three quarters of 2017, the stock draw came

as global oil demand growth rose by 1.6 mb/d

compared to the same period in 2016, outpacing the

0.7 mb/d net increase in global oil supply over the

same period (

Graph 1

). It should be noted that the rise

in global supply came solely from the countries outside

the Declaration of Cooperation. During the first

Graph 1: World oil demand and supply

average, 1Q-3Q17 vs. 1Q-3Q16

three quarters of 2017, OPEC-12 reduced their average production by 0.6 mb/d and non-OPEC participants

by 0.2 mb/d compared to the same period last year, while other non-OPEC oil producing countries

increased their supply by 0.9 mb/d. It should be highlighted that during the same period the conformity of the

OPEC and non-OPEC participants reached 102% compared to their agreed reference months.

The excess overhang has fallen considerably, with

the difference to the five-year average reduced by

around 183 mb since the beginning of this year to

stand at 154 mb in September (

Graph 2

). Crude and

products indicated surpluses of 129 mb and 25 mb

above the seasonal norm, respectively. On regional

basis, the bulk of this overhang is located in OECD

Americas followed by OECD Europe. OECD Asia

Pacific has remained broadly in line with the

five-year average.

Amid improving OECD demand, inventories in terms

of days of forward cover have fallen from more than

65 days in mid-2016 to currently stand at 62.3 days.

Similarly, the deviation with the five-year average

has been reducing from 6.7 days to just 1.9 days.

Graph 2: OECD commercial oil inventories,

difference to 5-year average

Meanwhile, floating storage for crude and products has been also on a declining trend since the beginning

of this year, dropping by around 50 mb to 87 mb at the end of October 2017. This trend has been

accelerated recently by a shift in the ICE Brent forward curve to backwardation, encouraging de-stocking.

Looking ahead, the high conformity levels of participating OPEC and non-OPEC producing countries, in

accordance with the ‘Declaration Cooperation’, have clearly played a key role in supporting stability in the oil

market and placing it on a more sustainable path. As a part of this process of cooperation, OPEC and

participating non-OPEC countries will meet at the end of this month to assess market developments and

consider how best to continue these efforts in the coming year.

-1.0 -0.5 0.0 0.5 1.0 1.5 2.0

World oil


World oil


Source: OPEC Secretariat.


1.6 mb/d





Libya &




Net change = 0.7 mb/d








Jan 14

May 14

Sep 14

Jan 15

May 15

Sep 15

Jan 16

May 16

Sep 16

Jan 17

May 17

Sep 17





Sources: Argus Media, EIA, Euroilstock, IEA, METI and

OPEC Secretariat.

Sep 17