* Oil cartel warns member countries against complacency amid
gains
The Organisation of Petroleum Exporting Countries (OPEC) held
its 179th meeting on Saturday through an online conference,
resolving to extend record oil-production cuts through July. This
was as Nigeria agreed to compensate for its inability to fully
comply with the April deal by henceforth embarking upon deeper cuts
over the next three months.
Just as Secretary-General of OPEC, Mr. Mohammad Barkindo,
cautioned member countries not to be carried away by recent gains
in the oil market as evidenced by the gradual rise in oil prices
and the on-going recovery process.
Minister of State for Petroleum Resources, Chief Timipre Sylva,
had in a statement said Nigeria was unable to completely adhere to
the agreement of the 23-member cartel to reduce daily production by
9.7 million barrels. Sylva stressed that the country achieved a 52
per cent success.
The April oil quota cut deal followed the effect of the COVID-19
pandemic on global demand and a devastating price fall brought
about by a price war between Russia and Saudi Arabia. While the
agreement called for the curbs to ease at the end of June, OPEC,
however, decided yesterday to remain cautious and extend the
production restrictions to July, with China and other countries
gradually opening up their economies.
For May, OPEC+ compliance with the deal was about 89 per cent,
meaning the group fell some 1.1 million barrels short of the target
set in the April agreement. The news also reflected on the
international price of oil Saturday, with Brent crude futures, the
global benchmark of prices, rising 5.8 per cent to $42.30 a barrel,
the highest level since March.
A statement released by OPEC after the virtual meeting noted the
positive ramifications of the decision taken by all participating
countries in the Declaration of Cooperation (DoC) and commended
additional adjustments from Saudi Arabia, United Arab Emirates
(UAE), Kuwait, Oman, Norway, and Canada, and shutting in of
production in view of the acute imbalance in the global oil
markets.
The statement said, “It was emphasised that the production
adjustments in May, as well as the gradual relaxation of many of
the lockdown measures as a result of the COVID-19 pandemic across
the globe and an economic pick-up, had contributed to a cautious
recovery and the return of more stability in the oil market.
“Nevertheless, with global oil demand expected to contract by
around 9 mb/d for the whole of 2020, consolidating this gradual
recovery will require continued commitment and intensified efforts
from DoC participating countries and all major producing
countries.
“In light of these facts, and in view of current fundamentals,
all member countries agreed to the five key elements in reaching
their unanimous decision, which will be recommended to non-OPEC
participating countries.”
It added that members, “Reconfirmed the existing arrangements
under the April agreement, subscribed to the concept of
compensation by those countries who were unable to reach full
conformity in May and June, with a willingness to accommodate it in
July, August and September, in addition to their already agreed
production adjustment for such months.”
Member countries also agreed the option of extending the first
phase of the production adjustments pertaining to May and June by
one further month and recognised that the continuity of the current
agreement was contingent on them fulfilling their obligations.
“The meeting, therefore, agreed unanimously to extend the first
phase of the production adjustment agreed at the 10th
(Extraordinary) OPEC and non-OPEC Ministerial Meeting for a further
month, to now run from 1 May 2020 to 31 July 2020,” OPEC said.
Meanwhile, Barkindo warned at the 11th OPEC and non-OPEC
ministerial meeting held via videoconference that despite the
successes in the market, global oil demand was still expected to
shrink by more than 17 million barrels per day in the second
quarter of 2020. He urged countries to remain committed and
proactive to the recovery process, saying, “This is not the time to
stand back and admire what we have achieved thus far.”
Barkindo said, “The very early green shoots of a revival are
evident; we do hope that we have turned a corner. Nevertheless,
global oil demand is still expected to shrink by more than 17 mb/d
in the 2Q20, and while it is expected to ease in the second half of
the year, for the whole of 2020 the contraction is still forecast
to be around 9.1mb/d. This will bring global oil demand to 90.6
mb/d; back to levels last seen before the 2014-2016 market
downturn. It underscores the fact that we cannot rest on our
laurels. We need to maintain the laser focus on helping bring
supply and demand back into balance and providing a more stable
market in the coming months.
“This is not the time to stand back and admire what we have
achieved thus far; we do not want to jeopardise these successes in
any way. We also need to appreciate that the waters remain choppy,
and as we navigate our journey it will not be plain sailing, but we
have to remain resolute. It is in the interests of us all.
“It was the legendary Russian poet, Bulat Okudzhava, that once
said: ‘Let us join hands my dear friends. We won’t get lost if we
are together.’ Together we can ensure that our hard-earned
achievements are not compromised or lost.
“Following on from the 179th Meeting of the OPEC Conference
earlier today, it is vital that we look to lay out possible
pathways for the coming months, the remainder of 2020 and into
2021.
“This will enable all DoC partners to remain proactive, focus on
100 per cent conformity, and help further rebalance fundamentals
and reduce volatility in the oil market.”
He said though it had been a rollercoaster ride since April,
what had been consistent over this period was the commitment of
participants in DoC to the voluntary production adjustments, the
largest and longest in the history of OPEC, OPEC+ and the oil
industry, and to rebalancing and stabilising the market.
Barkindo also spoke on the effect of the COVID-19 pandemic,
saying,
“A paralysis had gripped continents, nations, industries and
people. As we all bore witness too, the effects on the oil market
were unparalleled. Large-scale oil demand destruction, at a level
never seen before; a massive supply and demand imbalance; and,
global storage capacity filling quickly.
“Perhaps the epiphany of this was April 20, or what some have
called ‘Bloody Monday’, when the WTI May contract went negative,
ending the day at close to minus $40/b. The panic this day caused
was palpable. It left CEOs, oil companies, traders and analysts
open-mouthed; how could this have happened? It left us all
searching for answers.”
* Oil cartel warns member countries against complacency amid
gains
The Organisation of Petroleum Exporting Countries (OPEC) held
its 179th meeting on Saturday through an online conference,
resolving to extend record oil-production cuts through July. This
was as Nigeria agreed to compensate for its inability to fully
comply with the April deal by henceforth embarking upon deeper cuts
over the next three months.
Just as Secretary-General of OPEC, Mr. Mohammad Barkindo,
cautioned member countries not to be carried away by recent gains
in the oil market as evidenced by the gradual rise in oil prices
and the on-going recovery process.
Minister of State for Petroleum Resources, Chief Timipre Sylva,
had in a statement said Nigeria was unable to completely adhere to
the agreement of the 23-member cartel to reduce daily production by
9.7 million barrels. Sylva stressed that the country achieved a 52
per cent success.
The April oil quota cut deal followed the effect of the COVID-19
pandemic on global demand and a devastating price fall brought
about by a price war between Russia and Saudi Arabia. While the
agreement called for the curbs to ease at the end of June, OPEC,
however, decided yesterday to remain cautious and extend the
production restrictions to July, with China and other countries
gradually opening up their economies.
For May, OPEC+ compliance with the deal was about 89 per cent,
meaning the group fell some 1.1 million barrels short of the target
set in the April agreement. The news also reflected on the
international price of oil Saturday, with Brent crude futures, the
global benchmark of prices, rising 5.8 per cent to $42.30 a barrel,
the highest level since March.
A statement released by OPEC after the virtual meeting noted the
positive ramifications of the decision taken by all participating
countries in the Declaration of Cooperation (DoC) and commended
additional adjustments from Saudi Arabia, United Arab Emirates
(UAE), Kuwait, Oman, Norway, and Canada, and shutting in of
production in view of the acute imbalance in the global oil
markets.
The statement said, “It was emphasised that the production
adjustments in May, as well as the gradual relaxation of many of
the lockdown measures as a result of the COVID-19 pandemic across
the globe and an economic pick-up, had contributed to a cautious
recovery and the return of more stability in the oil market.
“Nevertheless, with global oil demand expected to contract by
around 9 mb/d for the whole of 2020, consolidating this gradual
recovery will require continued commitment and intensified efforts
from DoC participating countries and all major producing
countries.
“In light of these facts, and in view of current fundamentals,
all member countries agreed to the five key elements in reaching
their unanimous decision, which will be recommended to non-OPEC
participating countries.”
It added that members, “Reconfirmed the existing arrangements
under the April agreement, subscribed to the concept of
compensation by those countries who were unable to reach full
conformity in May and June, with a willingness to accommodate it in
July, August and September, in addition to their already agreed
production adjustment for such months.”
Member countries also agreed the option of extending the first
phase of the production adjustments pertaining to May and June by
one further month and recognised that the continuity of the current
agreement was contingent on them fulfilling their obligations.
“The meeting, therefore, agreed unanimously to extend the first
phase of the production adjustment agreed at the 10th
(Extraordinary) OPEC and non-OPEC Ministerial Meeting for a further
month, to now run from 1 May 2020 to 31 July 2020,” OPEC said.
Meanwhile, Barkindo warned at the 11th OPEC and non-OPEC
ministerial meeting held via videoconference that despite the
successes in the market, global oil demand was still expected to
shrink by more than 17 million barrels per day in the second
quarter of 2020. He urged countries to remain committed and
proactive to the recovery process, saying, “This is not the time to
stand back and admire what we have achieved thus far.”
Barkindo said, “The very early green shoots of a revival are
evident; we do hope that we have turned a corner. Nevertheless,
global oil demand is still expected to shrink by more than 17 mb/d
in the 2Q20, and while it is expected to ease in the second half of
the year, for the whole of 2020 the contraction is still forecast
to be around 9.1mb/d. This will bring global oil demand to 90.6
mb/d; back to levels last seen before the 2014-2016 market
downturn. It underscores the fact that we cannot rest on our
laurels. We need to maintain the laser focus on helping bring
supply and demand back into balance and providing a more stable
market in the coming months.
“This is not the time to stand back and admire what we have
achieved thus far; we do not want to jeopardise these successes in
any way. We also need to appreciate that the waters remain choppy,
and as we navigate our journey it will not be plain sailing, but we
have to remain resolute. It is in the interests of us all.
“It was the legendary Russian poet, Bulat Okudzhava, that once
said: ‘Let us join hands my dear friends. We won’t get lost if we
are together.’ Together we can ensure that our hard-earned
achievements are not compromised or lost.
“Following on from the 179th Meeting of the OPEC Conference
earlier today, it is vital that we look to lay out possible
pathways for the coming months, the remainder of 2020 and into
2021.
“This will enable all DoC partners to remain proactive, focus on
100 per cent conformity, and help further rebalance fundamentals
and reduce volatility in the oil market.”
He said though it had been a rollercoaster ride since April,
what had been consistent over this period was the commitment of
participants in DoC to the voluntary production adjustments, the
largest and longest in the history of OPEC, OPEC+ and the oil
industry, and to rebalancing and stabilising the market.
Barkindo also spoke on the effect of the COVID-19 pandemic,
saying,
“A paralysis had gripped continents, nations, industries and
people. As we all bore witness too, the effects on the oil market
were unparalleled. Large-scale oil demand destruction, at a level
never seen before; a massive supply and demand imbalance; and,
global storage capacity filling quickly.
“Perhaps the epiphany of this was April 20, or what some have
called ‘Bloody Monday’, when the WTI May contract went negative,
ending the day at close to minus $40/b. The panic this day caused
was palpable. It left CEOs, oil companies, traders and analysts
open-mouthed; how could this have happened? It left us all
searching for answers.”