Have You Seen 200MM Barrels of Oil Anywhere?

The International Energy Agency is trying to figure out where 200 million barrels of oil went.

The adviser to energy-consuming nations said on Wednesday that observable global oil inventories plunged by more than 600 million barrels last year. That would be fine were it not for the fact -- based on its estimates of supply and demand -- that the decrease should only have been 400 million.

There is always a gap between the two, but the 200 million barrel discrepancy means the oil market could be tighter than previously thought. The gap could be a result of underreporting of demand or over-reporting production, the IEA said. Its monthly report is a benchmark for traders trying to evaluate the balance between supply and demand the world over.

“A retrospective view shows the difficulty over the past two years of reliably analyzing and forecasting supply and demand,” the agency said on Wednesday. “Lessons learned will improve the work in 2022 and allow us to better understand our market.”

While the balance of supply and demand may be one cause of the mismatch, there could be others too. The agency uses satellite data to track oil stockpiles, for example -- but that doesn’t extend to the barrels used to fill pipes or those stored in huge underground caverns. 

There are also issues with reporting. While huge emphasis is placed on stockpiles in OECD nations -- the IEA’s core reporting area -- there are burgeoning volumes outside the region that go unreported, particularly in China. 

Throw in a global pandemic that has transformed the dynamics behind oil consumption, and tracking demand has become significantly more difficult.