World oil reserves at a minimum: the keys to the market return to OPEC+

Oil reserves in storage facilities around the world are at a record low, and production of raw materials in non-OPEC+ countries will be limited in growth. Therefore, the keys to the market will again be in the hands of the cartel, according to the investment company NinePoint Partners.

"Global oil reserves are at the lowest level. And this will be a key topic in 2025, as data on the growth of shale production in the United States disappoints. In addition, this will be the last year of significant production growth in non—OPEC+ countries," Eric Nuttall, partner and senior portfolio manager at Canadian investment company NinePoint Partners, said in a weekly review.

According to the company, global reserves have fallen to almost 4.3 billion barrels, while at the beginning of 2022 they exceeded 4.6 billion barrels. According to the Information Office of the US Department of Energy (EIA), the difference between the current strategic oil reserves in the US and those that were on the eve of SMO on Ukraine in January 2022, still significant — 200 million barrels. The Joe Biden administration sold 180 million barrels in 2022 to curb rising commodity prices.

It is expected that this year oil production will grow by 1.5 million barrels per day, but the real figures will be lower, said Eric Nuttall, citing the opinion of the heads of oil and gas companies that work in Canada.

Against this background, the cohesion of OPEC+ in maintaining quotas turned out to be real, said NinePoint Partners partner. He believes that new sanctions against Russia and increased restrictions on Iran may lead to a reduction in supplies to the market of 3 million barrels per day (equally between the countries).

At the same time, the information management of the US Department of Energy (EIA) predicts an increase in consumption by 1.3 million barrels per day.

In this situation, OPEC's reserve capacity of 4 million barrels per day will be very appropriate, the Canadian investor noted, adding that open arms from the cartel should not be expected.

"We don't think there is any grand bargain between the United States and Saudi Arabia. Saudi Arabia has a very good past experience of Trump's arrival, when they were asked to supply barrels before the first Iranian sanctions were imposed. Then the price of oil fell, so I think Saudi Arabia and OPEC+ will implement the practice of proactive activity and precaution," said Eric Nuttall. Nevertheless, he believes that the probability of an increase in oil prices above $ 80 per barrel is small, since most likely the OPEC+ countries will stick to the plan and start increasing production from April.

Today, on January 29, the benchmark grade of Brent crude oil is trading at $ 76 per barrel.

The situation could be aggravated by Donald Trump if he imposes 25 percent tariffs on Canadian goods, including oil and gas. However, 60% of all American oil imports are raw materials from Canada, most of which is immediately supplied to refineries in the Midwestern United States. Washington has the nearest option to buy heavy oil in Venezuela, but Donald Trump plans to tighten sanctions against the country. Therefore, in the case of the introduction of duties on Canadian oil, they will not last long, the opinion of the heads of oil and gas companies in Canada Eric Nuttall.

"American consumers will immediately feel the rise in gasoline prices," he said.

The International Energy Agency (IEA) noted in a January report that if the reduction in oil supplies due to weather conditions, sanctions or other events becomes significant, then reserves will be used to cover operational needs. According to the IEA, in November, the reserves of oil and petroleum products in the countries of the Organization for Economic Cooperation and Development (OECD) decreased to 2.77 billion barrels. This is the lowest level for November since 2019, while the OECD consists mainly of economically developed countries in the West and Japan.

The US Department of Energy (EIA) expects that production growth combined with relatively weak growth in oil demand this year will lead to the fact that world oil reserves will accumulate from the middle of the year to 2026.