By Michael Eboh
Members of the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC allies collectively called OPEC+, Saturday, agreed to extend the 10-million-barrels-per-day (mbd) first phase of the oil output cut by an additional one month, to July 2020.
In a statement released at the end of the online meeting, the countries also agreed that countries that subscribed to the Declaration of Cooperation (DoC) that were unable to fully conform to the cut in May and June 2020, to compensate for it by accommodating in their cut for July, August and September, in addition to their already agreed production adjustment for such months.
OPEC member countries and its allies under the OPEC+ agreement had agreed to cut supply by up to 10 million barrels per day between May and June 2020; eight (8) million barrels per day between July and December 2020 and six (6) million barrels per day from January 2021 to April 2022, respectively.
This means that the countries would be extending the 10 million barrels per day global crude oil supply to July 2020, from June 2020, as originally agreed.
OPEC and its allies also called on other major oil producers across the world, to proportionally contribute to the stabilization of the oil market, taking into consideration the substantial effort made by the OPEC and non-OPEC Participating Countries of the DoC.
In the statement, the countries said: “The Meeting emphasized that it was vital that DoC Participants, and all major producers, remain fully committed to efforts aimed at balancing and stabilizing the market. In this regard, it was noted that global oil demand was still expected to contract by around nine million barrels per day (mb/d) for the whole of 2020.
“In view of the current fundamentals, and following the agreement reached at the 179th Meeting of the OPEC Conference, all Participating Countries: reconfirmed the existing arrangements under the April agreement.
“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.
“Agreed the option of extending the first phase of the production adjustments pertaining in May and June by one further month. Recognized that the continuity of the current agreement is contingent on them fulfilling elements 1 and 2 above.
“Agreed without dissent that the full and timely implementation of the agreement remains inviolable, based on the five key elements, and endorsed the ‘Statement on the Declaration of Cooperation,’ which is annexed to this Press Release.
“The Meeting also called upon all major oil producers to proportionally contribute to the stabilization of the oil market, taking into consideration the substantial effort made by the OPEC and non-OPEC Participating Countries of the DoC.”
In his presentation to the group, Secretary-General of OPEC, Dr. Mohammad Barkindo, said: “The very early green shoots of 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 million barrels per day in the second quarter of 2020, 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 9.1 mb/d.
This will bring global oil demand to 90.6mb/d; back to levels last seen before the 2014-2016 market downturn. It underscores the fact that we can not 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 jeopardize 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.”