Analysts from JP Morgan said this month that oil reserves – including crude products and fuels – now play a bigger role in determining oil prices than the US dollar because Western sanctions on Russia have accelerated oil trade in other currencies.
“We expect stocks to drop relatively aggressively in July, and by the end of August, we should surpass the reserve increases we saw in the first half of the year,” said Christopher Haines, an analyst at Energy Aspects.
“We are on the verge of a supply squeeze. Saudi cuts are essentially speeding up the timeline.”
Both the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) expect oil demand to exceed supply this year, leading to overall stocks of about 400 to 500 thousand barrels per day (bpd), mainly represented in the second half of the year.
Although global oil reserves increased in May to the highest level since September 2021, according to the IEA, driven by a substantial increase in non-OECD countries, analysts say signs of tightening are appearing, mainly in the United States.
The declines in reserves have been geographically uneven so far, with drops in the United States and Europe offset by increases in China and Japan.
The declines have also been more targeted towards fuel rather than oil, although the supply of sour crude, typically priced lower than sweet crude, has decreased due to cuts introduced by OPEC and its allies.
It seems that the voluntary cuts announced by eight OPEC+ countries in April, plus the additional 1 million bpd from Saudi Arabia’s unilateral cut starting in July, are having the desired effect, with sour barrels becoming scarcer,” said JP Morgan analysts.
JP Morgan expects Brent benchmark prices, which are trading around US$85 dollars per barrel this Monday, to rise to $86 per barrel by the end of the third quarter before falling in the fourth quarter when reserves begin to increase again.
UBS, on the other hand, expects an increase to $85 to $90 per barrel in the coming months.
Regarding fuel, data from FGE Energy consultancy for key centers in the United States, Northern Europe, Japan, Singapore, and Fujairah in the United Arab Emirates, show that stocks have been decreasing aggressively so far this month, both onshore and offshore
