Global crude oil prices skidded lower this past week in reaction to the Joe Biden administration’s solicitation for large consuming nations (specifically Japan and China) to coordinate a release of oil from emergency reserves.

The ploy is aimed at “breaking OPEC’s back” and levering down oil prices to help alleviate commodity inflation effects. Contrary to the expectation, tapping emergency stockpiles to weaken oil prices historically produces the opposite response. Analyses we have published for our clients show crude prices rallying through emergency stockpiles releases.

Given green energy agendas by these same consumer nations, one would assume higher crude and refined product prices would be welcomed to foster the publicly espoused transition. But ironies abound making it difficult to take such politicking seriously. Does it make sense to you that subsidies are offered for electric-powered bicycles but none for human-powered bikes?

In any event, OPEC+’s goal to work inventories toward the 2010-2014 average means a potential dumping of emergency oil stockpiles might prompt the producer group to reverse path on the quota unwind as an offset.

The above noted, a feature of this past week’s update from the International Energy Agency was its non-OPEC supply figure for 2022. The IEA projects a year-over-year gain of 3.1 million barrels per day. Such a jump would mark the largest annual increase ever and push non-OPEC supply to an all-time high. The IEA projecting large non-OPEC output gains is not a new ploy, a ploy aimed at fostering bearish market sentiment. During the 2003-2008 period, the IEA each year projected large annual jumps in non-OPEC production. The actual changes in production were spectacularly below the projection.

This institutionalized exuberance ended up fomenting the “peak oil” story that was adopted by most market watchers. If you examine the IEA’s oil balance model for next year, it seems to us that the 3.1 million bpd non-OPEC rise was reverse engineered in stave off another global inventory bleed. Our forecast for non-OPEC output next year is a gain but less than half of what the IEA is projecting.

You may recall from previous columns that global spending on oil production has been cut back markedly since the 2014 high watermark — the collective cut totals $2.2 trillion. It is difficult to suggest this reduction in spending/activity and mounting anti-carbon pressures can somehow allow the oil industry to miraculously jack up supply.

Not to keep dumping rocks on the IEA, but the agency is making matters worse by not truing up its demand series. “Missing barrels” is a term that refers to the IEA’s oil demand series being too low. It is not a new problem (we were at the IEA after an OPEC meeting in ‘87 about an episode taking place then). A “missing barrel” issue is resolved only with the agency revising up its demand figures.

For reasons that remain a mystery, the IEA has since 4Q 2014 dragged its heels on truing up its numbers. Even before the craziness from COVID last year, the tally of “missing oil” was more than 1.8 billion barrels which was ridiculously high — the tally is now 2.8 billion barrels which exceeds the size of the commercial stockpile of the Organization for Economic Co-operation and Development.

Because the IEA continues to play this absurd game with its demand series and because most market watchers use the IEA balances as their own, many market participants have figures for the calculated “call on OPEC crude” that is simply too low. It also means that the global oil balance is much tighter than most suppose it to be. To be fair, crude prices trade off visible inventories, namely the OECD’s. Were it not the case and oil prices traded off of presumed stock levels, we would be seeing negative oil prices.

• Michael Rothman is the president & founder of Cornerstone Analytics, a US-based consultancy focusing on macro-energy research. He has nearly 40 years of experience covering the global energy markets and has been attending OPEC meetings since 1986. He is also the author of “Cornerstones of Life” which is available on Amazon.com.