Saudi Arabia empties domestic crude tanks

LONDON – Saudi Arabia has been progressively reducing its bloated domestic stocks of crude in a sign the global oil market is rebalancing, albeit more slowly than OPEC anticipated.

Saudi Arabia’s domestic crude stocks declined in 16 of the 19 months between November 2015 and May 2017 according to government data reported to the Joint Organisations Data Initiative.

Domestic stocks fell to just 259 million barrels at the end of May 2017, which was the lowest level since January 2012, according to updated figures published on Tuesday.

Stocks were down by 30 million barrels compared with the same month a year earlier and are now down by 71 million barrels from their peak in October 2015.

Like other producers, Saudi Arabia holds stocks for a range of reasons, including the need to cover field maintenance and manage seasonal changes in consumption and exports.

Operational stocks are held to satisfy demand for exports as well as from domestic oil refineries and power plants burning crude to produce electricity.

The best way to track stocks over time is to compare them with the total daily requirement from exports, refinery intake and direct crude burn.

In June 2014, just before oil prices started sliding, Saudi crude stocks totaled 286 million barrels, equivalent to about 28.4 days worth of combined exports, refinery intake and direct crude use.

By October 2015, with prices well on the way to their nadir in January 2016, stocks had risen to 329 million barrels, equivalent to 32.7 days worth of combined requirements.

Since then, stocks have been progressively reduced and were down to just 259 million barrels and 25.7 days worth of combined requirements in May 2017.

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