OPEC looks like it's won the battle to rebalance the crude market

Photo by Jacob Silberberg/Getty Images

Despite growing US shale supply, it looks like OPEC’s attempts to rebalance crude markets has succeeded.

As seen in the chart below from the Commonwealth Bank, stockpiles of oil inventories held by OECD nations is now back at the average level seen over the past five years.

Source: Commonwealth Bank

Over compliance with the OPEC-led accord has helped reduce excess oil stockpiles held by OECD nations,” says Vivek Dhar, Mining and Energy Commodities Analyst at the Commonwealth Bank.

“OPEC is moving ever closer, and on some estimates are already there, to reducing OECD stockpiles to the five year average.”

Dhar notes that when OPEC members first agreed to cap daily crude production at 32.5 million barrels back in late 2016, the cartel clearly stated that reducing global oil stockpiles to the five-year average was their objective.

This chart from the Commonwealth Bank shows that OPEC members have cut production more than required in recent months, contributing to the decline in inventory levels.

Source: Commonwealth Bank

Dhar expects the Brent crude price — the global benchmark — to average $65 a barrel this year 2018.

It currently sits at $71.04 a barrel.

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