“We should remember that although stocks are beginning to fall, they’re falling from a very great height,” Neil Atkinson, head of the oil industry and markets division at IEA,” told CNBC on Friday.
“If OECD stocks keep falling at the kind of rates we’ve seen in the second quarter, it’ll take until the early part of the next year before they get back down to the five-year average.”
Oil prices are poised for a second straight weekly decline as the market continues to question OPEC’s ability to rebalance the market.
To be sure, the world consumes more oil in the second half of the year, which helps to shrink oil stockpiles on the demand side.
Atkinson also noted that Saudi Arabia has committed to cutting exports in August and September, a sign that some producers are determined to keep up the progress they’ve achieved. The United Arab Emirates also said it will ship fewer barrels in September.
Still, other producers have offered little detail on how they plan to improve compliance.
Top producers Saudi Arabia and Russia summoned exporters including Iraq, Kazakhstan and Malaysia to Abu Dhabi this week to explain how they plan to meet their output targets. In a statement, OPEC said the laggards had expressed their “willingness to fully cooperate,” but the cartel did not lay out any actionable steps.