Global Oil Inventories Fell to 3.31bn Barrels

Global oil inventories - both commercial and in SPRs – have fallen the lowest level since at least January 2017 to 3.31bn barrels this month according to Kpler data.

• That estimate comes after Cushing stocks hit the lowest since 2014 earlier this month, before rising back up with this week’s EIA data.
• The main drivers of the decline in stocks “are two: the impact of Saudi voluntary cuts are now fully integrated in the oil system and that has tightened the market significantly,” Jorge Leon, Senior VP at Rystad Energy said.
• “Second, higher interest rates reduce the incentive to hold stocks and the opportunity cost of capital is higher,” Leon added.
• Another pull on oil in storage has been the pricing structure, with the market in backwardation, a pattern in which near-term cargoes are pricier than later-dated ones. That discourages refiners and traders from stockpiling supplies. In contrast to that the physical market signals a different picture namely that the prices of sweet-crude barrels, such as WTI, have plunged in recent weeks. In addition, rates for real Middle Eastern barrels have also fallen.
• The trend of declining stockpiles “is likely to continue assuming unchanged OPEC+ production policy, although the draws should be more moderate as we go into 2024,” Giovanni Staunovo, commodity analyst at UBS said.