As the global community comes to terms with the new wave of COVID-19 pandemic, the Secretary General of the Organisation of the Petroleum Oil Exporting Countries (OPEC), Mohammed Sanusi Barkindo, has raised the fear that the modest gains achieved in moderating global oil market so far in the year could pale into insignificance unless more sacrifices are made by OPEC members.
Barkindo, who acknowledged the previous sacrifices and ongoing efforts of key global economic leaders to tackle the fallouts of the pandemic said new lockdowns, second and third waves of COVID-19 and high levels of unemployment, remain major concerns globally.
He therefore called for concerted efforts in ensuring stability in the global oil market.
The OPEC chief, who spoke at the 24th meeting of the Joint Ministerial Monitoring Committee (JMMC) held via videoconference during the week, noted that despite conformity to production adjustments, the overhang remained massive in both the Organisation for Economic Co-operation and Development (OECD) countries; and non-OECD. He said the situation required vigilance and continuous monitoring, particularly given the large uncertainties going forward.
The JMMC came ahead of the impending 180th Meeting of the OPEC Conference on 30 November, and the 12th OPEC and non-OPEC Ministerial Meeting on 1 December,
According to him, the large fiscal stimulus packages remain supportive, and vaccines offer hope, but the benefits of the latter will take time to trickle through to the real economy, and oil demand growth.
He stated that “the COVID-19 pandemic showed no sign of abating, ripping through regions, countries and populations as we head into the northern hemisphere winter,” noting however that “the announcement of various COVID-19 vaccines with over 90% efficacy rates, including Russia’s Sputnik coronavirus vaccine, had given a shot in the arm to the economic and oil demand outlook, offering some hope going forward.”
He recalled that the 2020 outlook for oil demand had been revised lower this month to a negative -9.8 million barrels a day (mb/d), a drop of 0.3 mb/d from the October meeting. This, he said stands against growth of 1.2 mb/d that was expected in January 2020, a drop of a staggering 11 mb/d.
On the supply side, Barkindo said non-OPEC liquids production was forecast to contract by 2.4 mb/d in 2020, compared to expected growth of 2.4 mb/d that was forecast at the start of the year. For 2021, non-OPEC liquids is anticipated to expand by 0.93 mb/d.
He said, “We need to remind ourselves that total global inventories have surged by more than 1 billion barrels since the beginning of this year, and this would have been much higher without the Declaration of Cooperation (DoC), production adjustments and the high levels of conformity.
“We were heading to maximum tank tops if it was not for the historic decisions taken by the DoC .
He explained that despite all the sacrifices made so far, efforts to rebalance in order to reach normalised stock levels will spill into next year.
“We need to fully understand what is required, and be ready to adapt to any changing market dynamics to ensure we stay on the path that helps restore balance, and a sustainable stability to support growth and investments in the months and years ahead.
“We need the courage and flexibility we have all shown this year to take the decisions required ahead, one step at a time, guided by the data and robust analysis,” Barkindo said.