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OPEC keeps oil demand forecast little changed as it takes aim at shrinking stocks

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Dubai — Global oil stockpiles fell to a seven-month low in November but OPEC, which kept its 2021 demand outlook little changed from last month's forecast, has signaled it is still trying to shrink them further.

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OECD commercial oil inventories declined in November to 3.104 billion barrels, some 163.1 million barrels above the five-year average, OPEC said Jan. 14 in its latest monthly oil market report. That's the lowest since 140.6 million barrels in April. OPEC Secretary General Mohammed Barkindo told a Gulf Intelligence forum on Jan. 13 that the stocks are not low enough.

"What we are focused on is how can we assist the market in accelerating the stock drawdown in order to bring the market to balance," he said. "We are focusing on stocks globally. Not just OECD but also non-OECD because the market is always breaking down these barriers."

The OPEC+ group including Russia wants to reduce stockpiles to the five-year average through its production cuts, which are entering their fourth year. But the inventories ballooned in 2020 due to the coronavirus pandemic, as well as a short-lived one-month price war, when Saudi Arabia and others flooded the market in April after failing to reach a deal with Russia on cuts.

The sides patched up their differences and instituted deep cuts starting in May, and quotas are now set through the end of March. The OPEC+ alliance will meet again on March 4 to determine April quotas.

In its closely watched oil market report, OPEC kept its 2021 global demand forecast little changed at 95.91 million b/d, compared with 95.89 million b/d last month. The forecast is still 5.9 million b/d higher than 2020.

While rising COVID-19 infections and additional lockdown measures are affecting most major OECD countries, "the situation in emerging economies seems to have improved lately," OPEC said.

The analysis showed that the call on OPEC -- or how much of the bloc's crude production will be needed to balance global supply and demand -- would remain considerably higher than what it pumped in December.

The call is pegged at 27.17 million b/d for 2021, compared with OPEC's December production of 25.36 million b/d, as assessed by independent secondary sources used by the secretariat to track member output.

Keeping production below the call will help OPEC and its allies induce draws from storage.

The report guides the group's discussions and forms the basis of the market scenarios prepared by the OPEC secretariat's analysis arm for the policy negotiations.

Non-OPEC supply, meanwhile, will average 63.53 million b/d in 2021, up 850,000 b/d from 2020.