Why OECD Crude Oil Inventories Hit 2017 Lows
OECD’s crude oil inventories
The EIA (U.S. Energy Information Administration) estimates that the OECD’s (Organisation for Economic Cooperation and Development) crude oil inventories fell by 3 MMbbls (million barrels) to 2,985 MMbbls in August 2017 compared to July 2017. Inventories fell for the eighth time in the last ten weeks due to the production cut deal and improving global crude oil demand.
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Brent (BNO) and US crude oil (USO)(UCO) prices have risen 25% and 18% in the last three months. Higher crude oil prices have a positive impact on oil producers (XLE)(VDE) like Saudi Aramco, Rosneft, Shell (RDS.A), Bill Barrett (BBG), Hess (HES), and Bonanza Creek Energy (BCEI).
The EIA estimated that OECD oil inventories averaged 2,970 MMbbls in 2015 and 2,967 MMbbls in 2016. The EIA estimates that OECD oil inventories will average 2,995 MMbbls in 2017. Then, OECD oil inventories should rise to 3,066 MMbbls in 2018.
OECD crude oil inventories are at a 2017 low. They’re down 3% since their peak in July 2016. This momentum could push OECD inventories below their five-year average. The fall in OECD’s oil inventories could support crude oil prices.
However, OECD crude oil inventories were 6.4% or 179 MMbbls higher than the five-year average as of the latest data release for August. Nevertheless, a production cut deal and Saudi Arabia’s export cut plans could help draw down global crude oil inventories.
In the next part of this series, we’ll discuss some crude oil price forecasts.