Oil Stocks of IEA Countries

IEA member countries are required to ensure oil stock levels equivalent to no less than 90 days of net imports and to be ready to collectively respond to severe supply disruptions affecting the global oil market. Member countries have substantial flexibility in how they meet the stockholding obligation, which can include stocks held exclusively for emergencies and stocks held for commercial purposes (both in the form of crude oil and as refined products), as well as holding stocks in other countries under bilateral agreements. Each Member country is thus able to determine how to fully meet their IEA stockholding commitment in the manner most appropriate to their domestic circumstances.

Any questions or comments should be directed to the EPD Secretariat.

The IEA minimum stockholding obligation is based on the average daily net imports of the previous calendar year. This covers all petroleum, including both primary products¹ (such as crude oil and natural gas liquids [NGLs]) and refined products, with the exception of naphtha and volumes of oil used for international marine bunkers. Refined products are converted to crude oil equivalent, the amount of crude necessary to produce a given amount of product.

A country’s 90 day emergency reserve commitment is defined as: daily net imports x 90.

Daily net imports are defined as:

• net imports (adjusted for stock changes)² of primary products, from which is deducted a naphtha yield of 4%³;
• plus net imports (adjusted for stock changes) of all refined oil products (excluding naphtha and international marine bunkers, including additives, such as biofuels, which have already been blended into the fuel) converted to crude oil equivalent by multiplying by a factor of 1.065;
• divided by the number of days in the year.

A country’s emergency reserves, which are counted towards meeting its 90 day commitment, are defined as its total oil stocks⁴ (net any bilateral stockholding arrangements), adjusted in the following way:

• a naphtha yield of 4% is deducted from stocks of primary products;
• refined oil product stocks (with the exception of stocks of petrochemical naphtha and of international marine bunkers) could be counted as emergency reserves in either of the following ways:
• all existing product stocks, converted to crude oil equivalent by the general IEA factor of 1.065;
• only stocks of the three main product groups (gasolines and naphtha for gasoline production, middle distillates and heavy fuel oil) which are converted to crude oil equivalent by an average factor of 1.2⁵.
• a 10% deduction is made in order to account for unavailable stocks (such as tank bottoms).

Days of net import cover is the result of: emergency reserves ÷ daily net imports.

This column represents the days of net-import cover a country has through stocks held in other countries. These stocks can be either public (government and/or agency) stocks or industry stocks which are held for emergency purposes. The stocks in this column are not included in the figures for the country where they are held.

In specific instances, member countries are able to count stocks held in the territory of other countries in order to fulfil their minimum IEA stockholding requirements. This can include stocks held in other countries for logistical purposes, such as at a neighbouring country’s port where volumes are unloaded and delivered by pipeline. Stocks counted towards the minimum obligation can also include stocks held under bilateral agreements between governments, which guarantee access to such stocks during a crisis. This creates efficiencies in stockholding, especially for countries with insufficient domestic storage capacity or in which a major demand centre is located on or near an international border. Interconnectivity of the oil market infrastructure can also facilitate more cost-effective storage by utilising spare storage capacity in neighbouring countries. This flexibility is often an important means of enabling industry participants to meet stockholding obligations imposed by the government

In some cases, the stocks held abroad are actually owned by the company or agency with the stockholding obligation. In other cases, the company or agency does not own the stocks but has the right – based on short-term lease contracts or tickets – to purchase them in a crisis.

Many IEA member countries give oil companies or stockholding agencies the choice of meeting their stockholding obligations in two ways: either by owning physical stocks themselves or, for certain amounts, arranging stock cover through leasing agreements, referred to as “tickets”.

Tickets are stockholding arrangements under which the seller agrees to hold (or reserve) an amount of oil on behalf of the buyer, in return for an agreed fee. The buyer of the ticket (or reservation) effectively owns the option to take delivery of physical stocks in times of crisis, according to conditions specified in the contract.

Tickets can be for either crude or refined products; the agreement specifies the quantity, quality and location of the oil for a specified period (typically a calendar quarter). Tickets can be either domestic contracts or contracts between entities in separate countries (the latter must be within the framework of a bilateral government agreement).

The rationale behind oil stock tickets is that a company holding stocks in excess of its obligation can offer such stocks to cover the obligation of another company or agency, either domestically or abroad. Tickets are sold mainly by refiners with excess inventory as a way to offer compulsory stock obligation cover to third-party buyers. In some cases, a company in one country may provide tickets to one of its own affiliates that operates in another country. In all cases, the ticket seller is prohibited from counting the oil in question towards its own stockholding obligation.

Ticketing is a flexible and, generally, cost-effective way for companies or agencies with insufficient stocks to avoid being in breach of stockholding obligations. It essentially provides an alternative to acquiring oil stocks directly and building and/or renting necessary storage capacity.