OPEC and its Russia-led non-OPEC allies are in their third year of managing supply to the market, hoping to draw down high inventories and push up oil prices.
Early this month, the so-called OPEC+ coalition of partners rolled over their production cuts of a combined 1.8 million bpd into March 2020, as the resurging oil glut threatened to derail their continued efforts to manage the market.
OPEC is now considering using several metrics to assess where global oil (over)supply stands, including taking the five-year average of oil stocks in 2010-2014 instead of the most recent five-year average 2014-2018, which it currently reports in its monthly oil market reports and which the International Energy Agency (IEA) also takes as a benchmark to measure oil inventories.
Analysts warn that the 2010-2014 average metric will not give a correct comprehensive assessment of the oil market.
Fatih Birol, the IEA’s executive director, warns that moving the goalposts doesn’t change the situation in the oil market. The glut is there, regardless of how OPEC wants to measure inventories.
“The important thing is that you can change the methodology but you cannot change the realities of the market,” Birol told Reuters, noting that the 2010-2014 average is a new perspective OPEC proposes to use, while the IEA has its own perspective.
On the sidelines of the OPEC+ meeting in Vienna earlier this month, Khalid al-Falih, the Energy Minister of OPEC’s largest producer and de facto leader Saudi Arabia, told Al Arabiya:
“With demand rising over the next nine months and the commitments from all the countries, including the Kingdom of Saudi Arabia, we are approaching the normal levels of supplies of 2010-2014. It is one of the options in front of us as a goal.”
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