Oil stocks around the world need to decline by at least another 270 million barrels to reach a five-year industry average for Opec to be able to say the markets are becoming balanced, Opec Secretary General Mohammed Barkindo told Reuters. "The primary goal is to accelerate the stocks drawdown," Barkindo said on the sidelines of the World Economic Forum in Davos.
"We are already seeing stocks coming down from the high levels. Our eyes will continue to focus on the level of drawdown to bring the level near a five-year industry average," he said.
"Stocks have already come down to below 3 billion barrels in OECD commercial stocks. The delta now (with the five-year average) is around 270 million," he said. Opec's latest monthly oil market report, issued on Wednesday, said OECD commercial stocks stood at 2.993 billion barrels in November.
Barkindo said the stocks drawdown would help rebalance the market and establish the "equilibrium oil price" that will encourage investments in the sector after two consecutive years of capital expenditure cuts by state and private firms around the world.
Opec agreed to reduce output in tandem with non-Opec Russia and several other producers in December, in the first such move in 15 years. Barkindo said he believed Russia was playing a long-term game with Opec. "I have no doubts in Russia's commitment to continue to participate with us and solidify this platform effectively establishing a stabilising forum for the short, mid and long-term," Barkindo said.
Opec and non-Opec producers agreed to establish a joint ministerial monitoring committee and Barkindo said a meeting this weekend in Vienna would adopt an oversight and compliance mechanism. Opec will meet in May when it will decide whether to propose to extend the output cutting measures together with non-Opec countries.
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