LONDON/DUBAI: OPEC has shifted the goalposts for assessing an overhang in oil inventories, giving the group more room to prolong production cuts, while analysts warn the move will offer a distorted view of market conditions.
Including this new metric would be a shift away from the more recent five-year average of 2014-2018, which the International Energy Agency , and OPEC itself, had used to gauge market conditions. OECD stocks in May were 220 million barrels above the five-year average in 2010-2014, according to the most recent monthly report from the IEA, which represents economies that are part of the Organisation for Economic Cooperation and Development.
For some analysts, such as Bernstein's Oswald Clint, looking at inventories from the point of view of forward demand cover should also be considered. According to the IEA, in May OECD stocks on a forward demand basis covered 60 days, 1.4 days lower than the most recent five-year average of 61.4 days.