OPEC unanimously agree to extend 9.7 mb/d oil production cut

It was a busy day at the Organization of the Petroleum Exporting Countries (OPEC), as two meetings concluded this Saturday.

The 179^th Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC) was held via videoconference, on 06 June 2020, under the Chairmanship of its President, HE Mohamed Arkab, Minister of Energy of Algeria and Head of its Delegation.

The 11^th OPEC and non-OPEC Ministerial Meeting was also held via videoconference, on Saturday, 06 June 2020, under the Chairmanship of HRH Prince Abdul Aziz Bin Salman, Saudi Arabia’s Minister of Energy, and co-Chair HE Alexander Novak, Minister of Energy of the Russian Federation.

While the Ministerial Meeting recalled the rights of peoples and nations to permanent sovereignty over their natural wealth and resources, the Conference considered the Secretary General’s report, the report of the Economic Commission Board, as well as various administrative matters. The Conference also took note of oil market developments since it last met in Vienna on 5 March 2020 and reviewed the oil market outlook for the remainder of 2020 and into 2021.

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The Meeting reaffirmed the continued commitment of the participating producing countries in the ‘Declaration of Cooperation’ (DoC) to a stable market, the mutual interest of producing nations, the efficient, economic and secure supply to consumers, and a fair return on invested capital. Ecuador, Indonesia, Trinidad & Tobago were all observers at the Ministerial Meeting.

The positive ramifications of the decision taken by all participating countries in the Declaration of Cooperation (DoC) at the 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting on 12 April 2020 was noted at both the Conference and the Meeting.

Additional adjustments from Saudi Arabia (1 mb/d); the UAE (100 tb/d); Kuwait (80 tb/d) and Oman (10-15 tb/d) in June; the announcements of voluntary adjustments from several countries, such as Norway and Canada; as well as various oil company statements revising downward production plans and shutting in supply, was also noted at both events.

It was emphasized at both events that it was vital that DoC Participants, and all major producers, remain fully committed to efforts aimed at balancing and stabilizing the market.

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Although 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, global oil demand is expected to contract by around 9 mb/d for the whole 2020.

In light of the prevailing 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. They are:

1. Reconfirmed the existing arrangements under the April agreement.
2. Subscribed to the concept of compensation by those countries who were unable to reach full conformity (100 per cent) 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.
3. Agreed the option of extending the first phase of the production adjustments pertaining in May and June by one further month.
4. Recognized that the continuity of the current agreement is contingent on them fulfilling elements 1 and 2 above.
5. Agreed without dissent that the full and timely implementation of the agreement remains inviolable, based on the five key elements.

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.

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The Meeting called upon all major oil producers to contribute proportionally to the stabilization of the oil market, taking into consideration the substantial efforts made by the OPEC and non-OPEC Participating Countries of the DoC.

Member Countries reaffirmed their continued focus on fundamentals for a stable and balanced oil market, in the interests of producers, consumers, and the global economy.

In order to observe the fair, timely and equitable implementation of the above, the Joint Ministerial Monitoring Committee (JMMC) was requested to closely review the general energy market conditions and related factors, oil production levels, and conformity levels with the DoC, assisted by the Joint Technical Committee (JTC) and the OPEC Secretariat. The JMMC is to meet monthly until December 2020 for this purpose, with the next JMMC set for 18 June 2020.

The Meeting decided that an OPEC and non-OPEC Ministerial Meeting also will convene in Vienna, Austria, on 01 December 2020.

Written by;

Nnamdi M.