Sanusi Bakindo, OPEC Secretary General
In the special session held on the 15th, we had the opportunity to hear excellent presentations from some of our industry’s leading experts on the topic of “US oil supply – emerging from the COVID19 pandemic.”
The Organization of the Petroleum Exporting Countries (OPEC) 29th Technical OPEC and non-OPEC Meeting, which focused on the assessment of the global oil demand/supply balance for 2021 and 2022. To this end, a total of nine organizations and consultancies that publish global oil demand/supply balances on a regular, monthly basis – namely Argus Media, Energy Aspects, Energy Intelligence, ESAI, the IEA, IHS Markit, the US EIA, and Wood Mackenzie − were invited to share their latest assessments and outlooks for the short term.
As highlighted in these assessments and considering the encouraging market indicators, the participating producers of the Declaration of Cooperation clearly continue to play a highly valuable role in accelerating the market rebalancing process.
As you are aware, the world headlines continue to swirl around the topic of the multifaceted nature of the COVID-19 pandemic recovery. On one hand, we continue to witness significant progress in some regions of the world in vaccinating their populations, while in other parts of the world, vaccines continue to be in severe short supply.
Globally, more than 2.6 billion COVID-19 vaccine doses have now been administered, and each day, millions more are getting vaccinated. The international community is also stepping in to offer their assistance in boosting supplies around the world. For example, the G-7 Countries recently announced pledges of 1 billion COVID-19 vaccine doses, of which at least half are expected to be delivered by the end of 2021.
These efforts are helping the world slowly get a handle on this terrible pandemic and thereby expedite the global economic recovery. However, a wider-spread vaccination effort will be required to achieve a holistic and lasting immunity from this pandemic and its impacts.
The current “wild card” factor is the “Delta Variant” of the pandemic that is resulting in rising cases and renewed restrictions in many regions.
To date, it has reached more than 80 countries and has shown evidence of having higher transmissibility versus earlier strains of the virus.
It was reported to have been a contributor to India’s severe second wave of the pandemic that began in February.
Despite these setbacks, the overall brighter picture in relation to the pandemic recovery efforts has led to significantly improved oil market conditions and prospects for future growth.
In terms of the global economy, we are expecting to see GDP growth at a rate of 5.5% in 2021, with significant upward momentum in the second half of the year. China and the US are expected to see the lion’s share of growth in 2021, with China’s economy expanding by an estimated 8.5% and the US by 6.4%. Meanwhile, India, despite having to confront a devastating second-wave of COVID-19 infections, is still forecast to achieve robust growth of 9.5%. Last, week, OPEC held high-level talks with India, and we are cautiously optimistic that India will emerge from this second-wave and return to robust economic growth. In the Euro-zone, growth is anticipated at a level of 4.1% this year as COVID-19 restrictions are eased due to effective vaccination rollouts, a rise in consumer demand and prospects for a busy summer travel season.
The forecast for world oil demand in 2021 is 6.0 mb/d with total demand standing at 96.6 mb/d. The outlook for later this year is expected to improve further and potentially exceed 99 mb/d in the fourth quarter. It is also worth noting that we are now into the summer driving season, which will add considerable momentum to fuel demand levels, especially now that pandemic-related restrictions have been eased in many OECD countries.
On the supply side, we forecast non-OPEC supply to grow by an estimated 0.8 mb/d in 2021 for an average of 63.7 mb/d. The main drivers for 2021 supply growth are anticipated to be Canada, Brazil, China and Norway, while US liquids supply is now expected to only grow by a marginal 0.03 mb/d y-o-y. US crude oil is actually forecast to decline y-o-y by 0.1 mb/d to 11.2 mb/d – this decline is associated with uncertainties that we discussed in length during the special session of the Economic Commission Board. We are also continuing to monitor the ongoing Joint Comprehensive Plan of Action talks taking place here in Vienna. We expect that the return of Iranian production and exports will happen in a transparent and orderly fashion, supporting the
Declaration of Cooperation’s continued joint efforts to rebalance the oil market and promote market stability.
Lastly, in terms of stocks, we are pleased to see the steady reduction in inventories that were alarmingly nearly at tank tops last year at the height of the pandemic. According to preliminary data for May 2021, total OECD commercial oil stocks rose slightly month-on-month by 9.9 mb, and they were 275 mb lower than one year ago and 20 mb below the 2015-2019 average.
High conformity levels by participating countries of the Declaration of Cooperation to voluntary adjustments have been key to bringing down inventory levels and accelerating the market balancing process. Overall conformity to the production adjustments was 114% in May, (including Mexico — 115%), a clear indication of the DoC countries’ ongoing commitment to restoring stability in the global oil market.
These improving market indicators, in tandem with the ongoing supportive role of the Declaration of cooperation participating producers give us hope that we are on the right path to recovery from the COVID-19 pandemic. We are however, not completely out of the woods yet.
There are still lingering uncertainties that we must consider. One of these relates to the spread of COVID-19 mutations, the latest of which includes the Delta Variant, which I alluded to earlier. We are also keeping our eye firmly on sovereign debt levels in major economies, which continue to balloon to unprecedented heights, fueled by massive fiscal and monetary stimulus programmes.
In fact, government debt levels, after the COVID19 lock-downs, have reached their highest to date in both advanced economies and emerging market economies. The absolute amount of global debt has increased by more than $24 trillion over the course of the pandemic − this is more than the annual GDP of the United States. World debt now stands at a massive $281 trillion – to put this in perspective, this is significantly more than the annual world GDP, which amounts to around $80 trillion. These factors combined are contributing to increased levels of inflation in the months to come.
Today, as is customary, the Secretariat will brief the Committee on the latest developments in the global oil market, and then we will take a look at the production data and conformity levels of the participating countries of the DoC.
I would like to highlight two distinct aspects of the oil market prospects that will be crucial to our deliberations today. The first one entails a careful analysis of the global oil demand and supply balance in the second half of 2021 in view of the strengthening oil market conditions, including the drawdowns of surplus oil stocks in the OECD. Our base case forecast indicates higher oil demand of nearly 5 mb/d during the second half of 2021 compared to the first half of the year, which is a significant increase, even if uncertainties and associated risks would be factored in. This is evident in both strong market sentiment and fundamentals. The second aspect is to closely assess the 2022 outlook. Our analyses and the preliminary forecast for next year warrant a very careful consideration of market fundamentals within the context of the Declaration of Cooperation. As of August 2021, we enter the final phase of the decisions of the 10th OPEC-non OPEC Ministerial Meeting.
The decision signed on the 12th April 2020 is valid until the 30th of April 2022, however, the decision will be revisited in December 2021. As I highlighted earlier, the combination of our vigilant approach to market dynamics and the current significant uncertainties calls for prudence, particularly as we want to avoid risking any global oil market imbalance after April 2022. The Secretariat will thus also be presenting forecasts with scenarios for both 2021 and 2022 for the Committee’s consideration. Our deliberations here today and the resulting report of this Committee will feed into tomorrow’s 31st Meeting of the JMMC, and then, by extension, into Thursday’s 181st Meeting of the Conference and 18th OPEC and Non OPEC Ministerial Meeting.
Before we dive into today’s agenda and in closing, allow me to leave you with some encouraging words from 13th century philosopher and scholar Jalāl ad-Dīn Muḥammad Rūmī. He said, and I quote, “Everyone has been made for some particular work, and the desire for that work has been put in every heart.”
Thus, dear friends and colleagues, let us continue to carry out the important work of this Committee, knowing that, as Master Rumi stated, we were made for this job, and the desire to achieve success in everything we do has been put into our hearts.
This Remark was delivered by Sanusi Bakindo, OPEC Secretary General at the 53rd Meeting of the Joint Technical Committee
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