The OPEC policy is unclear in recent weeks, showing some weaknesses of the agreements reached. After the last two meetings of the cartel became clear that they are not aware of where they are going, but know they have not yet arrived. Since the beginning of the production quota program last year, it was acknowledged that the group aims to return stocks to the average for the past five years. However, this was not clearly defined.

Saudi oil minister Khalid al-Falih acknowledged this at a press conference after the last week meeting of the Joint Ministerial Monitoring Committee in Muscat, Oman. He then stated that there was a need for a technical discussion on what the petroleum market needs in terms of quantitative reserves.

In themselves, however, they are not a very good basis on which to build a policy of production.

We have an accurate picture of what stocks are a few months late. The latest figures for the Organization for Economic Cooperation and Development (OECD), published by the International Energy Agency (IEA) on January 19th, are for the end of November, and data for September and October were revised by 12 million barrels.

OPEC refrains from setting price targets, perhaps partly because it does not want to be blamed for manipulating the market. So they analyze the volume of stocks. It often happens that the objectives set are seen as returning the OECD’s trade reserves to their average levels for five years, but that is because they are the only comprehensive and consistently reflected data in an accessible form. But as a real measure of how much oil the world should have in reserve are quite useless.

The restricting focus to the OECD means ignoring more than half of the world’s oil consumption, and not one but the most dynamic part. Over the last five years, the demand for oil outside the organization has increased nearly five times that of developed countries, adding 6.4 million barrels per day in 2012-2017 compared to just 1.3 million barrels per day for OECD countries, according to the IEA.

The other problem is that measuring stock in the form of a normal quantity does not take into account the function they perform. In addition, they provide opportunity for gains in price movements, stocks play an important role in combining seasonally varying oil demand and much less in the seasonal supply profile.

They are also a buffer that provides protection against sudden drops in supply or increased demand. This implies that the reserves should be measured in number of days for which they can perform their roles rather than just a quantity of barrels. With an increase in demand of approximately 1.7 million barrels per day over the past three years, the world needs more oil in reserve so that it can serve as a buffer in the same way.

Yet even when measuring in barrels per day, there is a problem with the goals OPEC and friends are trying to accomplish. Why exactly the average of five years of reserves? Why not four or six? And as Khalid al-Falih said in Muscat last week, there is the problem that the five-year average values ​​themselves are influenced by the overtaxing the group is trying to reduce.

Recent data from the IEA show just how great this impact is. The five-year average for OECD crude and refined product stocks increased by about 150 million barrels since mid-2016. Considering that the initial excess inventory of the organization was estimated at 340 million barrels, that is a big difference.

It all matters. Without knowing where they are trying to reach, OPEC and Russia risk losing the moment to change their policies and begin to ease the grip on supply. According to representatives of two of the biggest oil-producing powers, Khalid al-Falih and his Russian counterpart Alexander Novak, the reduction in production should continue and restrictions in some form may be needed next year.

The cuts, planned or not, which OPEC and friends have undertaken over the past year, have changed oil market forecasts. Khalid al-Falih must start his technical discussion quickly so that ministers have a real idea of ​​where they should be heading when they meet in June.