OPEC's latest decisions have been greeted by the oil markets with widespread skepticism.
Oil stockpiled in consuming countries, including stock held in floating storage, is having a greater impact on the oil markets than OPEC's agreed production cuts, according to a leading analyst.
Nicholas Sarkis, director-general of the Arab Petroleum Research Centre (APRC), said the "exceptionally high level of stocks" in consuming countries was weighing "far more heavily on the balance of supply and demand."
He said the OPEC cuts were anyway "largely theoretical.?
Sarkis said that global supply surplus has led to a sharp jump in industry stocks in industrialized countries, which reached an estimated level of fully 2,707 million barrels at the end of November, equivalent to more than 57 days of forward consumption and five days more than the average of 52 days that are regarded as ?normal?.
That had helped push crude oil prices down, together with ?the fact that the latest reductions remained ink on paper until January 1 and the previous cut of 1.5 million bpd was not fully enforced, with the rate of compliance by its members not exceeding 55%,? said Sarkis.
Sarkis said Saudi Arabia's decision in the middle of last year to increase output in an attempt to slow what were then sky-rocketing prices had ?resulted in additions to stocks of some 45 million barrels.?
?Just to return to a level of stocks that can be regarded as more normal, which is to say to soak up a stock surplus corresponding to five days' consumption, or some 240 million barrels, OPEC countries would now have to start applying absolutely strictly the cumulative reduction in output of 4.2 million bpd for a period of nearly two months,? he said.
?Provided, of course, that world demand did not decline further, especially in the run-up to next spring, when world needs could decline by 0.9-1 million bpd relative to the first quarter of 2009.?
According to Sarkis, OPEC's latest decisions have been greeted by the oil markets with "widespread skepticism". He said it was attributable "to the partial compliance with the 1.5-million bpd cut that was due to take effect on November 1.?
?It can also be explained by the contradictory attitudes adopted by different OPEC members and by the absence or inadequacy of clear signals sent to the market regarding the determination of OPEC producers to reverse the downward trend in oil prices and bring them back up to a specified level within a specified time through the implementation of specific measures,? he said.