The Organisation of Petroleum Exporting Countries (OPEC) has warned that the COVID-19 pandemic may result to the exhaustion of available global crude oil storage capacity before the end of May 2020 with a potential addition of 14.7 million barrels per day (mbd) excess volume to existing stocks.
OPEC explained that this figure could add a further 1.3 billion barrels to the global crude oil stocks.
The Secretary General, OPEC, Dr. Mohammed Barkindo, therefore, called for an urgent action to avert the emerging development, while speaking during a recent virtual meeting of the G20 energy ministers.
According to Barkindo, the COVID-19 pandemic has pervaded almost every aspect of the world’s daily lives as a major disruptor in terms of the tragic loss of lives, forced widespread lockdowns, economic distress and shutdown of schools.
Barkindo noted that, “every economic sector has been impacted by this silent beast,” saying that, “this is clearly evident in global oil. Every producer, many of whom are developing nations, has been impacted; no-one is immune.”
According to him, the virus has forced OPEC and its allies to assess and reassess what the consequences are on the oil industry every day, adding that, “we need to find solutions to help all peoples of the world, the industry and related businesses, as we try and navigate these extraordinary times.”
He further said: “This is starkly apparent when we look at the harrowing global recession now upon us, and the oil demand destruction we are facing. We see global GDP growth in 2020 at a negative 1.1 per cent, a greater contraction than that for the Great Recession of 2008-2009, and global oil demand growth is forecast to drop by 6.8mbd, with the second quarter alone around 12mbd and expanding.
“These are jaw-dropping numbers! The jaw drops even further when we look at the supply and demand imbalance in the 2Q20, if no action is taken. There could be a colossal excess volume of 14.7mbd, which would add a further 1.3 billion barrels to global crude oil stocks.
“This figures suggests that the available global crude oil storage capacity would be exhausted before the end of May. There is a ghostly spectre encircling the oil industry; it needs to be addressed urgently. We need to act now, so we can come out of other side of this pandemic with the strength of our industry intact. An industry that has fueled the current civilization.”
He stated that the decision of OPEC and its allies to adjust crude oil production by 10mbd beginning on May 1, 2020, for an initial period of two months, then by 8mbd from July to December 2020 and by 6mbd for the period of January 2021 to April 2022, in the interests of producers, consumers, and the global economy was a responsible action.
He however maintained the need to broaden the cooperation on the basis that such complex challenges need comprehensive and ‘global’ solutions.
“We welcome the importance that the G20 attaches to oil market stability. We also appreciate that many G20 members are large consumers of oil. In this regard, we need to appreciate that any shortfall in investments in the coming year could sow the seeds for future energy security issues in the years ahead. It is in all of our interests to support stability in this vital global industry,” he noted.