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    800,000 Barrels of 'Missing' Crude 'Key' to Global Oil Market Crisis

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    The oversupplied global oil market has its mystery – missing barrels of crude. Last year, 800,000 barrels of crude a day were unaccounted for by the International Energy Agency (IEA).

    Where these barrels are, or if they even existed, is key to understand the ongoing crisis in the global crude market, an article in The Wall Street Journal read.

    Some analysts say those barrels may have ended up in China. Others say that the barrels were created by flaws in accounting and they do not actually exist. If this is true then the oversupply in the market could be much smaller and crude prices may rebound faster.

    Barrels have gone missing before, but last year their amount reached the highest level in 17 years.

    "If the market is tighter than assumed due to the missing barrels, prices could spike quicker," David Pursell, managing director at investment bank Tudor, Pickering, Holt & Co., was quoted as saying.

    According to the author, last year the IEA estimated that the average daily output was 1.9 million barrels more that there was demand for. Some 770,000 barrels of that crude went into onshore storage while roughly 300,000 barrels were in transit by sea or via pipelines. Thus, some 800,000 barrels a day were unaccounted for.

    In 1998, the last time the number of missing barrels was so high, the issue was addressed by US Congress. A senator asked the Government Accountability Office to examine the data. The agency found that statistical "limitations can introduce errors into the data." Most analysts agree with this conclusion.

    "The most likely explanation for the majority of the missing barrels is simply that they do not exist," Paul Horsnell, an oil analyst at Standard Chartered, was quoted as saying by the WSJ.

    A representative of the IEA referred to the agency’s website which says that the missing barrels can be explained by overstated supply, understated demand or stockpile changes in non-OECD countries.

    Meanwhile, the IEA estimates crude supply and demand from global data, its numbers on where the oversupply is stockpiled come only from OECD country members. As a result, some of the missing barrels could be found in non-ECD countries, including China.

    But some analysts disagree. "The missing barrels have become such a large proportion of the oversupply that this would imply that stockpiles are building up in non-OECD countries at a much faster pace than those in the organization, something that they question," the article read.

    Over 50 percent of global crude demand now comes from non-OECD countries where statistical gathering is not well developed. Demand in countries outside the OECD could be larger than it is reported by the IEA, according to a report by investment bank DNB Markets.

    Oil data is "an imperfect science," Rob Haworth, senior strategist at US Bank Wealth Management, told the WSJ.

    "Whether these barrels are missing or not, the global glut of crude is still far from over," he concluded.

    Related:

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    Tags:
    oil market, crisis, oil price, economy, International Energy Agency (IEA), Organization for Economic Cooperation and Development (OECD)
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