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Some explanations on oil stocks, levels and changes
In the Joint Oil Data Exercise questionnaire, the current definition agreed
on by all organizations was voluntarily kept simple; however, since several
questions were asked by participants, some clarifications regarding stocks
need to be given.
Definition currently in the Joint Oil Data Exercise questionnaire:
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Closing Stock: |
Represents the primary stocks level at the end of the month within
national territories; includes stocks held by importers, refiners,
stock holding organisations and governments |
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Stock Changes: |
Closing minus opening level
Positive number corresponds to stock build, negative number
corresponds to stock draw. |
Why are data on stocks important ?
Oil stocks are a critical element of information in an oil balance. The
majority of oil stocks are essential to keep the global supply system
operating. They are oil in pipelines going from the wellhead production
sites to refineries, from refineries to consumers; they are held in tankers,
railcars and road tankers linking production sites, refineries and
consumers.
Not to include stock data in an oil balance leads to a lack of transparency
in the market. The trend in stocks is important for many oil analysts when
making an evaluation of the oil market situation.
Stocks are a leading indicator of prices: the level of oil stocks often
determines the price, e.g. when oil stocks are low it means that there may
be a shortage or a need for replenishing, which indicates that prices will
be rising. On the other hand if the industry is amply supplied with the
right oil, there may be a price reduction expected. This is why it is
important to have information on the situation of oil stocks in the world.
Information on product stocks can be as important as crude oil stocks. For
example, crude oil stocks give an indication of the availability of crude to
refineries in each country, and therefore are evidence on how well the
refineries might provide the domestic market. On the other hand, information
on low gasoline stocks before the driving season, or low heating oil stocks
before the winter can be a warning signal to refineries, oil companies and
governments that not only prices could rise, but shortages might possibly
occur – e.g. heating oil problems experienced in autumn 2000.
What are
primary, secondary and tertiary stocks ?
Primary stocks
are held by the various companies supplying the markets : ranging from
producers, refiners to importers. They are held in refinery tanks, bulk
terminals, pipeline tankage, barges and coastal tankers (if they stay in the
same country), tankers in port (if they are to be discharged at port) and in
inland ship bunkers. Additionally stocks held for strategic purposes by
governments (e.g. US SPR) or by stockholding organisations (e.g. EBV in
Germany) are included in the primary stock category.
Secondary stocks
are stocks in small bulk plants (marketing facilities below a certain
capacity e.g. 50,000 bl in US, which receive their product by rail or truck)
and retail establishments.
Tertiary stocks
are stocks held by final end-consumers, they can be power plants, industrial
entities or consumers in the residential/commercial sector.
What data
should be collected ?
Only data on primary oil stocks should be reported in the Joint Oil Data
Exercise, for several reasons:
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The most important data on stocks are primary oil stocks. These
are stocks held by producers, refiners, importers, stock holding
organisations and strategic stocks. The oil in pipelines or in
rail tank cars, in truck tank cars etc which are necessary to
keep the supply system operational are of a lesser interest –
they cannot be used as otherwise the supply system would break
down.
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Data on primary oil stocks is the easiest to collect. Data for
secondary and tertiary stocks are rarely collected, as they are
very difficult to obtain. The reason for this is that there are
often too many retail stations, or small bulk plants in the
country, and certainly the number of end-users from which data
would need to be collected is enormous. However, despite the
lack of information, secondary and tertiary stocks can be very
important, as they sometimes undergo large fluctuations, e.g.
households heating oil tanks are rapidly depleted when weather
is cold; retail stations stocks can be considerably run down
when a tax increase is expected. in many countries, there is no
distinction made between secondary stocks. Please note that
terminology can differ.
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Information on primary oil stocks is consistent with the
definition of “consumption” or to be more precise, “sales”,
which includes only sales or deliveries made by refineries and
importers (i.e. primary suppliers), secondary and tertiary
stocks should not be included.
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The following table lists the main categories to be included and not be
included under Primary Oil Stocks :
What
should be included ?
What
should not be included ?
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Oil not yet produced,
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in pipelines,
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in rail tank cars,
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in truck tank cars,
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in sea-going ships bunkers,
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in retail stores and service stations,
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in bunkers at sea,
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military stocks
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Stocks held on board incoming ocean vessels in port or at mooring should be
included irrespective of whether they have been cleared by customs or not.
Exclude stocks on board vessels at high sea.
Location of Stocks
Stocks are to be reported on a national territory basis:
this means that all oil held within a country geographically is to be
reported, irrespective of the ownership of the oil. For example, oil held in
the Netherlands ARA zone for the benefit of German companies is to be
included in the Netherlands report, not in the German oil stocks.
Whether the stocks are held onshore of offshore does not make a difference
as long as they are held on the national territory.
Timing / Cut-off date
Stocks of crude oil and petroleum products are volumes in storage at a
particular time. For oil stocks to be consistent data with other oil
flows, a monthly basis is chosen. As example, sales of oil products are
reported on a monthly calendar basis, that is why it is important to also
measure stocks on a monthly basis. Stocks are therefore considered at the
beginning (1st) and end of each month (i.e. on 30th
for a short month, on 31st for 31-day months).
The stock changes are measured as Closing stocks minus Opening stocks. The
opening stocks on 1st of each month should equal the closing
stocks of the previous month. A positive number indicates that stocks have
increased during the month. A negative number for stock change shows a stock
decrease.
Confidentiality of Stocks
In most countries stock data are publicly available. However, in a few
countries, stocks are still considered confidential; they are regarded as
valuable commercial information, upon which competitors may act.
Given the
importance of knowledge of stock levels, both for national purposes, and for
international market analysis, it is of crucial importance that data on oil
stock levels and changes be reported for all countries.
There are several reasons why the stock data requested in the Joint Oil Data
Exercise should not treated confidential. Firstly, because the level of
aggregation of stocks asked for this exercise, i.e. on national level, does
make it difficult to consider it as commercial information. There is no
disaggregation by owner, i.e. oil company, refinery or distributor, nor is
there a disaggregation by location site.
Secondly, the time lag between the reporting time and the time that the
information would be made available is too long to make it sensitive
commercial data, worthwhile for competitors to react. The oil industry
usually acts on up-to-date information, and information on oil stocks more
than one month old would no longer be considered up-to-date.
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