In response to the global crisis and the massive oil demand contraction, Secretary-General of the Organization for the Petroleum Exporting Countries, OPEC, Mohammad Barkindo has said the cuts initiated by the group and 10 non-OPEC participating countries under the ‘Declaration of Cooperation’ (DoC), would extend well into 2022.
He made the revelation in a speech delivered at the International Monetary and Financial Committee Meeting held on Thursday via videoconference. According to him, OPEC and its non-OPEC partners acted “swiftly and decisively” to contribute to more stability in the oil market by voluntarily adjusting production.
“These are the largest and longest in duration in the history of the oil industry, lasting until well into 2022”, he said.
A series of technical and ministerial Meetings of both the OPEC Conference and the countries participating in the DoC throughout 2020 and 2021 have successfully responded to market challenges and confirmed the commitment to sustainable oil market stability. These joint efforts succeeded in driving down the unprecedentedly high commercial oil inventories. Due to the cuts, oil price which had crashed below $10 per barrel at the beginning of the covid-19 pandemic and lockdown, had since climbed above $60 per barrel.
Barkindo said OPEC’s longstanding commitment to supporting oil market stability for the mutual benefit of consuming and producing nations still holds, and that it would further contribute significantly to addressing the common challenges of the global economy.
“The global economy and, consequently, the global oil market are slowly emerging from one of the most severe crises in recent history, caused by the COVID-19 pandemic. In 2020, countries around the world virtually shut down, imposed travel restrictions and mandated social-distancing measures. These measures are still necessary in some regions to combat new waves of infections and virus mutations, with a recovery to pre-pandemic levels not yet projected for 2021. Following an estimated decline of 3.5% in 2020, the OPEC Secretariat forecasts global economic growth of 5.4% in 2021”.
“The measures to stem the spread of COVID-19 not only severely affected global economic growth, they also caused a historic demand shock in the oil market, which led to extreme volatility in oil prices. The impact of the lockdown measures has disproportionally affected mobility and thereby fuel demand. World oil demand is therefore estimated by the Secretariat to have contracted by a very significant 9.5 mb/d in 2020 and is forecast to grow by around 6 mb/d in 2021. Similarly, non-OPEC supply suffered from the unprecedented events and is estimated to have declined by around 2.5 mb/d in 2020, while it is forecast to grow by around 1 mb/d in 2021”, he said.