Global oil stock build to start in December: Barkindo

Global oil inventories could begin to build before the end of this year, Opec secretary-general Mohammed Barkindo said today, reinforcing an Opec+ forecast of oversupply in the first quarter.

"The surplus is already beginning in December," Barkindo said on the sidelines of the Adipec conference in Abu Dhabi. "The projections, not only from Opec, but from the IEA and others, show throughout the quarters of next year that there would be oversupply in the market, using the metric of the OECD stocks."

The prospect of a surplus at the start 2022 was a key argument invoked by the Opec+ alliance on 4 November, when it confirmed a 400,000 b/d December increase in coalition quotas in the face of key buyers' calls for more.

"[Oversupply] is further evidence why we should be very cautious, measured in the decisions that we take every month," Barkindo said, noting pointing to the unpredictability of potential further Covid-19 strains and government responses to the pandemic.

"All these uncertainties further buttress our commitment that we need to keep our hands firmly on the steering wheel, continue to meet regularly on a monthly basis, review your data, your report, talking to all practitioners and moving step by step," he said.

Earlier this month, the Opec+ Joint Technical Committee (JTC) — which studies market fundamentals that inform the group's output policy — examined a base supply-and-demand scenario that projected a 223mn bl global oil stock build in the first quarter and OECD commercial inventories moving back above the 2015-19 average from the second quarter, according to a document seen by Argus. Opec+ has not clarified if its forecasts factor in the group's inability to bring back a full 400,000 b/d each month. Tightening levels of spare capacity, infrastructure challenges and sabotage have prevented some members from meeting their quotas, and the group as a whole produced 690,000 b/d below the upper limit last month.

This came as a surge in global crude prices to above $80/bl in recent weeks has repeatedly put the Opec+ 'slow and steady' approach at sharp odds with key consuming countries, including India, Japan and the US. As high prices ripple into US gasoline costs, the White House has mulled a supply release from the country's Strategic Petroleum Reserve.

Earlier in the week, Mideast Gulf allies Kuwait and the UAE once again pushed back against foreign pressures, invoking a stock build next year.

"We would like the industry, the market, the world to have confidence in our ability to continue to do our best, so that this recovery does not falter in any shape or form," Barkindo said today.

The IEA today flagged rising oil supplies, which could soften prices.

"Preliminary data and satellite observations of stock changes in October suggest the tide might be turning," the agency said in its latest Oil Market Report (OMR).

By Nader Itayim and Ruxandra Iordache