OPEC: COVID-19 Effects on Oil Market Horrifying

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Chineme Okafor

The Organisation of Petroleum Exporting Countries (OPEC) has said the level of decline experienced in energy and oil demands since the outbreak of the COVID-19 pandemic was steep, adding that the pandemic’s impacts have been horrifying.

OPEC stated that efforts by its members and allies to stabilise the oil market resulted in them taking extra production cuts down to 9.7 million barrels a day (mbd), the deepest they have ever done in the history of the cartel.

Its Secretary General, Dr. Mohammad Barkindo, stated this at the fourth high-level meeting of the OPEC-India Energy Dialogue which was held via a video-conference. The meeting also had the Indian Minister of Petroleum and Natural Gas, Dharmendra Pradhan in attendance.

According to him: “The effects of the pandemic have been absolutely horrifying, not only at the human level, but also regarding the oil market and the global economy. It has resulted in the sharpest downturn in energy and oil demand in living memory. The scale and reach of the pandemic is to say the least unprecedented.”

He noted that the actions of OPEC and its Declaration of Cooperation (DOC) partners over the past eight months to stabilise oil prices and rebalance the oil markets has been useful to the global oil market.

“The DOC participants collectively adjusted down production over a two-year period, starting with 9.7mb/d – the deepest and the longest adjustment in history, and nearly five times more than historic adjustments made during the last downturn of 2014-16.

“This dramatic action has helped put markets on a path to rebalancing, though the road to recovery is most certainly still going to be long and wrought with difficulty,” Barkindo explained.

He stated that key demand centres like India which were affected by COVID-19 have begun to record gradual rise in oil demands as easing COVID-19 restrictions support economic activity and travel.

“The US has seen stronger-than-expected economic indicators in the third quarter of this year, with 2020 growth revised up from last month’s –5.1 per cent to –4.2 per cent in the latest Monthly Oil Market Report.

“We also see significant overall oil demand growth of +6.5 mb/d in 2021. Although we find ourselves in a difficult situation, we are optimistic that the future will be much brighter and that the world will see a way out of this pandemic next year,” he added.

Barkindo stated that OPEC will be keen to strengthen its relationship with India, adding that while the country is projected in OPEC’s World Oil Outlook projects to transition to clean energy sources by 2045, the country’s rapidly growing need for energy is equally expected to quadruple by 2045.

He said: “India is predicted to be the largest contributor to incremental oil demand over the longer term, adding some 6.3mbd between now and 2045. With this in mind, the strengthening connection between OPEC and India represents a key element in energy security.

“Indeed, given the future outlook, we will have much to discuss today. We hope, your Excellency, that our relationship will continue to deepen, including addressing the role of OPEC as a partner in the energy transition.

“We have always said that all sources of energy will be needed to meet growth in energy requirements in the coming decades. At the same time, the entire world is threatened by climate change. It is up to all energy producers and consumers to do their utmost to make all sources of energy cleaner and greener.”