Wall Street Journal: Where did 800,000 barrels of oil go?

Baku. 18 March. REPORT.AZ/ 'There is mystery at the heart of the oversupplied global oil market: missing barrels of crude', Report informs, The Wall Street Journal (WSJ) writes.

Last year, there were 800,000 barrels of oil a day unaccounted for by the International Energy Agency, the energy monitor that puts together data on crude supply and demand. Where these barrels ended up, or if they even existed, is key to an oil market that remains under pressure from the glut in crude.

Some analysts say the barrels may be in China. Others believe the barrels were created by flawed accounting and they don’t actually exist. If they don’t exist, then the oversupply that has driven crude prices to decade lows could be much smaller than estimated and prices could rebound faster.

Whatever the answer, the discrepancy underscores how oil prices flip around based on data that investors are often unsure of.

Barrels have gone missing before, but last year the tally of unaccounted-for oil grew to its highest level in 17 years. At a time when the issue of oversupply dominates the oil industry, this matters.

“If the market is tighter than assumed due to the missing barrels, prices could spike quicker,” said David Pursell, managing director at energy-focused investment bank Tudor, Pickering, Holt & Co.

Here’s how a barrel of crude goes “missing” in the data. Last year, the IEA estimated that on average the world produced around 1.9 million barrels a day more crude than there was demand for. Of that crude, 770,000 barrels went into onshore storage while roughly 300,000 barrels were in transit on the seas or through pipelines. That left roughly 800,000 barrels a day unaccounted for in the data. Global oil supply is about 96 million barrels a day.

In the fourth quarter, the number of missing barrels reached as high as 1.1 million barrels a day, or 43% of the estimated oversupply during that period.

The IEA collates production and demand data from around the world, and its monthly reports often move prices. Other major market monitors, like the U.S. Energy Information Administration and the Organization of the Petroleum Exporting Countries, don’t break down their data to show the number of missing barrels.