December 4, 2022

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OECD oil stockpiles are now below 2015-2019 average

1 min read

OPEC has drawn down inventories

That’s an important factor for OPEC+. It means that they will now aim to balance supply and demand, rather than pumping below demand to draw down inventories.

The talk for August is 500k bpd but I think risks are solidly higher and we could even see 1 mbpd.

Nonetheless, WTI is at the highs of the day at $73.21.

OPEC has drawn down inventories

The interesting contrast is that public oil companies aren’t drilling the way they used to at $73. Shale was a bit of a scam in all but the best basins and investors want a return of capital.

Here’s what CIBC wrote yesterday:

We hosted 14 fireside chats and four panel presentations with 25 energy
companies last week during our Energy Investor Conference, which was
held virtually. We came away from the conference with a continued
appreciation that capital discipline remains a dominant focus for the group.

I wonder if that changes if/when OPEC exhausts spare capacity. One worry from these producers is that they set high drilling budgets and then OPEC comes in with the hammer and they’re caught out once again. That’s an incentive for OPEC to hold some cards back through the fall, when next year’s budgets are being set. But if they hold too much back, then prices could run and oil companies might drill anyway.

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