OPEC Monthly Oil Market Report – November 2017
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 (
). 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 (
). 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
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
Source: OPEC Secretariat.
Net change = 0.7 mb/d
Sources: Argus Media, EIA, Euroilstock, IEA, METI and