OPEC Committee Meets Over May Oil Volume Cuts

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•Barkindo insists forecasts remain uncertain

By Emmanuel Addeh

The Organisation of Petroleum Exporting Countries (OPEC) Joint Ministerial Monitoring Committee (JMMC) convened yesterday ahead of the 15th OPEC and non-OPEC ministerial meeting today to review the volume of oil cuts for May.

The JMMC is expected to oversee the compliance of OPEC+ participants with oil production quotas and revise how underperforming countries are offsetting their production shortfalls from previous months.

After the meeting, the alliance of oil producers is expected to decide whether or not to lower output quotas or further extend the current level of production cuts, which in March stood at 7.05 million barrels a day (mbd). However, the production quotas in April will decrease to 6.9 mbd due to a slight increase in oil production granted to Russia and Kazakhstan.

Delivering his address at the 28th JMMC via videoconference, OPEC Secretary-General, Dr. Sanusi Barkindo, called for caution, noting that uncertainties still surrounded global crude oil demand.

He recalled that a year ago, the oil industry was at a precipice, with economies in lockdown, oil demand dropping by more than 20 mb/d and WTI plummeting to the negative territory.

Barkindo commended the commitment that the group of producers has shown to the decision to cut supply, with strong conformity to the adjustments, as well as support for the compensation mechanism, stressing that it has been responsible for the recovery so far recorded.

He said: “The positives offer hope, but we need to remember that the environment remains challenging, complex and uncertain, with the market volatility we have witnessed in the last two weeks of March a reminder of the fragility facing economies and oil demand.”

He reiterated that expectations for global economic growth in 2021 are now higher at 5.1 per cent, compared to 4.8 per cent at its last meeting, driven by additional US stimulus measures as well as a continued acceleration in the recovery in Asian economies.

“However, we should not be out smelling the flowers just yet, and this forecast may be revisited. It is surrounded by uncertainties, including the prevalence of COVID-19 variants; the uneven rollout of vaccines; further lockdowns and third waves in several countries; and inflationary pressures and central bank responses,” he added.

Barkindo said oil demand prospects in the second half had remained relatively steady, reflecting expectations for a stronger economic recovery and positive impact of vaccination rollouts.

On the supply side, he stated that non-OPEC liquids for 2021 will grow by almost 1 mb/d, compared to expectations of 0.7 mb/d at its last meeting.

Barkindo said the realignment of inventories was also being driven by the excellent conformity to the production adjustments from participants, and acknowledged the additional commitment of 1 mb/d for February, March and April from Saudi Arabia.

“It is our task again today to review the current situation and provide feedback for tomorrow’s (today’s) OPEC and non-OPEC ministerial meeting as we navigate a course for the rest of the second quarter of 2021 and beyond,” he said.