The media is full with news that there is a global oil glut.

There are now more than 3bn barrels of excess oil in the world 13/11/2015

Record oil glut stands at 3bn barrels 13/11/2015

It was parroted by the Australian public broadcaster ABC TV, using this (unsuitable) opportunity to take a swipe at peak oil:

Peak oil losing credibility as renewables shift accelerates 24/12/2015
“With the world awash with too much crude oil at the moment, the fear of an economic catastrophe when fossil fuels start running out is quietly fading in the background.”

These stories go back to the IEA’s Monthly Oil Market Report (OMR), November 2015 which reads:

“Stockpiles of oil at a record 3 billion barrels are providing world markets with a degree of comfort. This massive cushion has inflated even as the global oil market adjusts to $50/bbl oil.”

So how much is 3 bn barrels?

Let’s have a look at the statistics in the latest IEA OMR of December 2015. It’s only about OECD stocks, not the whole world.

Fig 1: OECD total oil stocks

We see that oil stocks in the period 2009 (light blue line) to 2013 (dotted line) varied between 2,6 bn and 2.8 bn barrels along with seasonal changes. The average stocks for this time of the year is 2.7 bn barrels. We can consider this range as the result of normal operating conditions allowing for accidents, refinery maintenance, transport disruptions, strikes etc but also demand side changes from a weak economy (2009) to high oil prices (2013).

Therefore, that magic glut is 3 bn – 2.7 bn = 300 million barrels or roughly 10% of the average. The long term trend of OECD stocks is shown in the next graph:

Fig 2: OECD stock changes since 1988

In 1988, average stocks were 2.5 bn barrels One can put many trend lines into Fig 2, depending on which period one selects and which exceptional events are excluded. OECD consumption peaked in 2005 at 23% higher than in 1988 but is now only 11% higher. So one would expect average stocks also to be higher accordingly, at around 2.8 bn barrels.

Regional distribution of OECD stocks

So where exactly is that so-called glut?

OECD Europe

Fig 3: Europe total oil stocks

European total oil stocks (crude plus products) are in the upper range.

Fig 4: Europe crude oil stocks

European crude stocks are also at the upper end of the range, but that’s not really a glut.

Fig 5: Europe gasoline and distillate stocks

Europe’s gasoline stocks are average, but distillates are 18% higher. Half of that higher stock results from an unseasonal increase in the Netherlands.

Fig 6: Middle Distillate Stocks in Germany and Netherlands

The reason for higher stock-levels in the Netherlands is that products cannot be easily transported on the river Rhine which experienced low water levels for many months in 2015, due to lack of rainfall in the catchment.

Fig 7: Tankers can’t take full load due to low water levels on river Rhine

Shrinking Rhine: shipping scrapes by as river stays at lowest level for 40 years 12/11/2015

European ‘extreme weather belt’ linked to worst drought since 2003

OECD Asia Oceania

Australia, Japan, Korea

Fig 8: Asia Oceania total oil stocks

Total oil stocks in Asia Oceania are slightly above the usual range and 5% above average.

Fig 9: Asia Oceania crude oil stocks 21% above average

Fig 10: Asia Oceania total product stocks 7% below average

OECD Americas

US, Canada, Mexico

Fig 11: Americas total oil stocks

Ah, here we finally have a large part of that magic glut, around 190 mb, 15% higher than average and around 7 days of forward demand, most of it crude in the US:

Fig 12: US commercial crude stocks 100 mb > average

Fig 13: US crude stocks by region

Fig 14: Americas distillate stocks around average

Fig 15: America’s gasoline stock a bit above average

Summary OECD

Let’s put all this in 2 summary graphs

Fig 16: OECD stock changes in comparison to 5 year average

Fig 16 shows that 2/3 of the above-average oil stocks are in America, mainly in the US. 46% is crude oil, most likely light tight (shale) oil (LTO) including condensate which requires special refining. 15% are other products like LPG, also coming mainly from LTO. 7% of additional stocks are NGLs, much of it from shale gas.

When the tight oil boom started in 2010/11 there were following phases/options to accommodate growing quantities of LTO

  1. Replacement of light oil imports of similar grade (eg. From West/North Africa)
  2. Blending with medium and heavy crudes (however resulting in refining inefficiencies and different product mix)
  3. Increased capacity utilisation of existing refineries
  4. Debottlenecking refineries by e.g. modifying the atmospheric distillation unit
  5. New stabilizers, splitters and hydroskimmers

It seems options 1-4 have been exhausted. It could well be that tight oil inventories went up as phase 5 is too slow and expensive.

Next option is to export:

Congressional Leaders Agree to Lift 40-Year Ban on Oil Exports 16/12/2015

Fig 17: OECD stocks and changes compared to 5 year average

Fig 17 is a zero scaled graph showing the average stocks 2010-14 (dark green, grey and red columns) and the additional stock build until October 2015 (light green columns) for each of the 3 OECD regions. Only 57% of the total stocks of 2.97 bn barrels have really grown (dark green columns) by 10% (light green columns) to arrive at a 67% share. 17% have increased by less than a negligible 3% (grey columns) and 16% have actually decreased.

Whether LTO stocks will remain at current levels will be interesting to watch as US oil production seems to have peaked.


Fig 18: Singapore product stocks slightly above range


Fig 19: China product stocks

Chinese oil consumption has increased by around 20% since 2010. A similar increase in peak stocks would require 180 mb. Compared to OECD countries China’s product stocks per 1 mb/d product consumption are much lower so there is no case of stocks being too high.


It is misleading to say the world sits on excess stocks of 3 bn barrels of oil, 2.7 bn of which are already needed in both crude and product stocks for a smooth operation of the refining and distribution system. Most of the stock build since mid 2014 seems to be related to US light tight oil which refineries could not accommodate due to their original designs.