It has often been said that the JTC acronym has another meaning: Jewel in the Crown. For half a century of meetings, the JTC’s inputs and analytical direction have proven invaluable to the entire ‘Declaration of Cooperation’ process. With the Secretariat’s support, the JTC has ensured that in taking policy decisions, our Ministers have been provided with the highest quality in market analysis and data. This has become all the more important given the range of ramifications stemming from the COVID-19 pandemic. Much has transpired since we last met. There is a lot of information and data to process. Indeed, the OECD has recently spoken about how the pandemic has complicated data-collection and sometimes skewed statistics, meaning that making accurate assessments is no straightforward task. The last month contained many positive developments but also reminders of the ongoing uncertainties caused by the COVID19 pandemic. Broadly, the prospects for global economic growth and a recovery in oil demand look positive. We have seen the passage of more than $20 trillion worth of economic stimulus around the world, including a package of $1.9 trillion in the US, which by some estimates could add up to 1 percentage point to global economic growth.
The positive ramifications of one of the greatest achievements in the history of medical science continued: namely, the speed of the development, approval and rollout of several vaccines for the COVID-19 pandemic.
Tremendous strides have been achieved in rates of inoculations in many parts of the globe. Approximately 550 million vaccinations have been administered worldwide; this is equal to roughly seven doses per 100 cases. Ten different vaccines are currently being administered across the world, with several more due to begin administration at some stage this year. More than 200 vaccine candidates are in development, with over 60 in clinical development.
In recent weeks, several central banks, including the Federal Reserve and the Bank of England, as well as other reporting agencies have upgraded their global growth forecasts for 2021. The Secretariat has revised its global GDP growth forecast to 5.1% for 2021, compared with 4.8% last month. World oil demand is expected to increase by 5.9 mb/d during the year.
There are other signs of recovery in many sectors. According to Flightradar24, commercial flights are back to two-thirds of comparable pre-Covid levels. In China, air passenger volumes climbed to 23.9 million trips, three times the level of the same time a year earlier. Growth in demand for freight transportation and fuels for petrochemicals continue on an upward trajectory.
There continues to be positive news in the fields of medical research. The pharmaceutical company, Moderna, began clinical trials testing vaccine efficacy on children under 12, including babies. A further study is underway to test the vaccine on children aged 12 to 17 and results could be known as early as the summer.
In a year when we have worried about our families and loved ones, I think we will all sleep a little better at night, especially as parents or grandparents, knowing that the little ones are safe against the virus. The month also saw some unexpected
The month also saw some unexpected builds in crude and product inventories, particularly in the US. It has taken some petrochemical plants longer than expected to come back online following the deep freeze in Texas. However, as the American Petroleum Institute said, “oil demand remained solid despite mid- and southwest U.S. winter emergency disruptions that clouded the readings on oil supply, trade and inventories beginning in mid-February.” Similar views were shared by the EIA.
Without question, countries participating in the ‘Declaration of Cooperation’ process have made a significant contribution to this improved outlook. Rigorous conformity levels with our voluntary adjustments in production have acted as a stabilizing influence in the market. Turning to the uncertainties, getting the vaccine out of the lab and into people’s arms still represents one of the most complicated challenges in human history.
As the Director General of the WHO, Tedros Adhanom Ghebreyesus, stated, the recent increases in COVID-19 cases and deaths represent, ‘truly worrying trends…We continue to see the impact of variants, opening up of societies and inequitable vaccine roll out.
There is also the risk that the vaccination rollout exacerbates socio-economic divisions between developed and developing countries; the ‘haves and have nots’ divide could be worsened by the ‘jabs and jab nots’ divide. A fair and equitable distribution of the vaccine is necessary because nobody is truly safe from
COVID-19 until we are all safe. The COVID19 Vaccines Global Access (COVAX) initiative will be critical in this regard.
In essence, the world is experiencing a race between the vaccine rollout and the development of mutations of the virus’s spike protein. Mutations of a virus are an inevitable evolutionary process, but what makes them worthy of our attention are those classified by national health authorities and the WHO as
‘Variants of Concern.’ Twelve months ago, we were all probably indifferent to the following sequence of letters and numbers: B.1.1.7, B.1.351 and P.1. Now, not only is the global community familiar with what these sequences mean, but we probably share an uncomfortable feeling when we hear them mentioned, for they are, of course, the names for the ‘Big Three’ ‘Variants of Concern.’
The B.1.1.7 Lineage, first detected in Britain, has been found in over 90 countries. Thought to be between 30 and 50% more infectious than other variants, preliminary evidence suggests it is more deadly. The good news is that testing suggests the vaccine works well against it. The B.1.351 lineage of the virus was first identified in South Africa in December. It has since been detected in at least 48 countries. This variant has concerned scientists as, unfortunately; clinical trials have indicated that vaccines offer less protection against it. That said, plans are underway among relevant authorities to update vaccines accordingly.
Moderna has begun a trial of a new version of their vaccine targeted specifically at this variant. The P.1 lineage is a close relative of the B.1.351.
It has also shown signs that it can re-infect people who have developed natural immunity after being infected with previous strains of the virus. It has now spread to 25 countries. These variants are the reason that many nations are re-implementing lockdown measures. Here in Vienna for example, as of Thursday, in 48 hours’ time, the authorities will reintroduce a hard lockdown. Other central European countries are doing likewise. Of course, researches into these variants is still in the relatively early stages, but underscore the degree of uncertainty that affects this critical phase described by virologists as ensuring the coronavirus evolves from being a pandemic to being endemic.
These uncertainties related to COVID-19 and demand recovery have contributed to the 14% decline in oil prices seen in recent weeks, which oscillated from the low 60’s to above $69/b then back to lower levels, including a touch of contango in the front month. It is always prudent to strike the right balance between the market fundamentals and the expectations that usually runs ahead of the curve.
Ladies and gentlemen,
Our industry is playing and will continue to play a critical role in helping the world become vaccinated. This undertaking is estimated to require 8 to 10 billion syringes. These are often plastic, single use and specialized syringesessential products produced by petroleum.
Transportation fuel will be critical in logistics to disseminate the vaccines throughout the globe. Life-saving and personal protective equipment continues to come from petroleum products.
In this context, a stable oil market is essential at this hour of need. We should do everything within our power to contribute to it. The analysis that this committee provides is a vital cog in that process. Its importance cannot be overstated. I would like to conclude on an optimistic note.
Although we are living through very challenging times, I hope we can take comfort from the words of the poet, Jalal ad-Din Rumi: “We were once in heaven; we were friends of the angels; let us return there; for that is our city.”
I wish us fruitful discussions and a productive meeting.
This OPEC Opening Remarks and address was delivered by HE Mohammad Sanusi Barkindo on 30, March 2021
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