Global oil storage acts as the balancing point between supply and demand. During periods when supply exceeds demand, crude oil and petroleum products can be stored for future use. For example, in the economic downturn of late 2008, the unexpected drop in world demand led to record crude oil inventories in the US and other OECD countries.
Currently, demand is outstripping current production, and so oil
supplies have recently been supplemented by draws on inventories to meet
consumer needs. Given the uncertainty of supply and demand, petroleum
inventories are often seen as a precautionary measure.
Recent Developments
Global crude oil storage capacity is believed to be up to 7.2Bbbl,
including commercial and strategic storage. However, for technical reasons, only
about 80% of this nameplate capacity is usable. Global oil storage, which serves
as a tangible measure of the oil market balance, is grouped in three major
components.
- The first group is the OECD’s commercial oil stocks and Strategic Petroleum Reserves (SPR). The OECD commercial stocks serve as a key indicator of the status of the oil market balance, as they are frequently published by national government reporting systems, and as the seasonal variations in the OECD commercial stock levels are inversely correlated with oil demand.
- The second major group is the non-OECD commercial inventories and SPR, which have become more important in recent years as non-OECD oil demand has increased, taking a higher share than OECD demand in total world oil demand and requiring more stockpiling. However, non-OECD inventory levels are hard to track due to a lack of complete data. In the absence of regularly reported data, stock levels in non-OECD inventories are often estimated using information released by companies and ministries, as well as data published in the JODI database.
- The final group is oil at sea, which includes “oil afloat” and “oil in transit”.
In the June quarter of 2020, the global oil market saw oil
supply heavily outpace world oil demand, leading to a drastic surge in global
oil inventories within a short span of a couple of months. In response to this
critical situation, OPEC and non-OPEC oil producing countries participating in
the ‘Declaration of Cooperation’ (DoC) announced voluntary productions
adjustments commensurate with the huge oil stock surplus, to achieve the
rebalancing and stabilisation of the global oil market.
Since their historic peak in June 2020, global oil inventories
have declined significantly. By the end of September 2021, they had fallen by
938Mbbl, with all components witnessing stock draws.

Over this period, total OECD commercial and SPR stocks have
dropped by 411Mbbl and 46Mbbl, respectively, while non-OECD stocks and oil at
sea have fallen by 320Mbbl and 160Mbbl, respectively (EIA, IEA, METI and OPEC
data).
Moreover, OECD commercial oil inventories, compared to the
latest five-year average (2015- 2019), reached a high of around 270Mbbl in June
2020, clearly reflecting a huge oversupply.
This surplus declined to a deficit of 163Mbbl at the end of
September 2021, mainly driven by the DoC’s successful efforts to stabilise the
market and supported by higher refinery crude runs, an indicator of an
improvement in oil demand on the back of the economic recovery following the
initial impact of the Covid-19 pandemic.

Clearly, the global stock draws during 2021 were largely due to
the efforts of the DoC and a pick-up in global oil demand, which outpaced
global supply by 0.1Mbpd, 1.5Mbpd and 2.2Mbpd in the March, June, and September
quarters of 2021, respectively. This is equivalent to a total implied stock
draw of 342Mbbl.
AME forecasts that global oil supply will outpace global oil demand
in both 2022 and 2023, resulting in rising global oil stocks. AME expects
global oil storage will rise by an average of 0.5Mbpd in 2022 and 0.6Mbpd in
2023, and that these inventory builds will generally put downward pressure on
crude oil prices.
Commercial Stock Movements
The following commercial oil stock
movements were recently estimated by OPEC. OECD commercial inventories are a
key indicator of market fundamentals. Low OECD inventory levels raise concerns
over market stability and capacity to absorb shocks.
OECD
In November, total OECD commercial oil stocks were down by 16.0Mbbl
month on month. At 2,721Mbbl, they were down 389Mbbl year on year and 247Mbbl
lower than the latest five-year average. Within the components, crude and
products stocks fell by 12.7Mbbl and 3.3Mbbl, respectively, month on month.
Total commercial oil stocks in November fell in OECD Americas and OECD Europe,
while they rose slightly in OECD Asia Pacific.
US
In December, total US commercial oil stocks fell by 27.4Mbbl month
on month to 1,195Mbbl. This was 148.6Mbbl, or 11.1%, lower than the same month
in 2020, and 93.9Mbbl, or 7.3%, below the latest five-year average. Crude and
product stocks fell month on month by 15.3Mbbl and 12.1Mbbl, respectively.
Japan
In Japan, total commercial oil stocks in November rose slightly
by 0.1Mbbl month on month to settle at 121.4Mbbl. This is 19.0Mbbl, or 13.5%,
lower than the same month in 2020, and 24.8Mbbl, or 17.0%, below the latest
five-year average. Crude stocks rose by 2.8Mbbl, while products stocks fell month
on month by 2.7Mbbl.
Europe
In November, total European commercial oil
stocks fell month on month by 14.9Mbbl to 1,040.3Mbbl. At this level, they were
124.8Mbbl, or 10.7%, below the same month a year earlier, and 60.4Mbbl, or
5.5%, lower than the latest five-year average. Crude and product stocks fell month
on month by 12.0Mbbl and 3.0Mbbl, respectively.
