The purpose of the project is to provide a ‘snapshot ‘of global oil inventories at any given time and to identify whether the global or regional markets are ‘well balanced.’ If not, there may be regional or global surpluses (or shortages) of crude oil supplies and inventories that can trigger a price reaction, and subsequent rebalancing of world oil markets. The potential consequences of apolitical or economic disturbance in such an environment will depend on the market conditions existing at the time of forecast, and the exact nature of the supply, or demand shock.
The primary hypothesis is that the equilibrium ‘market balancing’ level of world oil inventories has changed significantly since the middle of the last decade. Given a number of factors, including:
(a) the Shale Revolution in 2004, and resulting rapid response of shale oil supplies to changes in world oil prices.
(b) the expansion of global oil refining and consuming centers.
(c) the buildup of strategic petroleum reserves in non-OECD countries; the equilibrium level of crude oil and product inventories is likely to be much higher than it was a decade ago. The objective of this study is to determine what the optimal level of inventories would be to rebalance the world oil markets.
