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Is the world producing more oil than it needs, or vice versa?
Even the most well-known agencies have difficulty answering this question, as it's hard to gauge how much oil each country produces, and harder still to gauge how much each country consumes.
Changes in oil inventory levels is the best way to estimate the true balance between the supply and demand of oil. If inventory levels go up by more than it typically does, it likely means that the world overproduced and vice versa. The following graph shows the extent of overproduction as implied by the change in U.S. inventory levels.
The graph below shows the monthly changes in inventory levels compared to seasonal norms.
Inventory levels typically go down in December as refiners import less oil in order to minimize taxes on inventories. January inventory levels typically go up to make up for this effect. However, this effect does not occur in some years.