The Organization of the Petroleum Exporting Countries (OPEC) has recommended the extension of oil production cuts until the end of the year and further cuts until June 2020 due to the impact of the coronavirus outbreak on global oil demand.
In an opening address to the 178th (Extraordinary) Meeting of the OPEC Conference held in Vienna on Thursday, March 5 Mohamed Arkab, Algeria’s Minister of Energy and President of the OPEC Conference 2020 said that the decisions taken at the 177th Meeting of the OPEC Conference and the 7th OPEC and non-OPEC Ministerial Meeting of 5th and 6th December 2019, to further adjust production voluntarily, saw an improvement in market sentiment over the course of subsequent weeks.
He added: “That being said, we now convene at a time when the outbreak of COVID-19 has had a pronounced adverse impact on economic and oil demand forecasts in 2020, particularly in the first and second quarters.
“This underscores the fact that events in the oil market are subject to critical uncertainties beyond the capacity of any one individual stakeholder to manage on their own.”
The conference noted the positive ramifications of the decision to further voluntarily adjust production at the 177th Meeting of the Conference, and subsequently the 7th OPEC and non-OPEC Ministerial Meeting, with market sentiment improving in the weeks thereafter.
However, the COVID-19 outbreak has had a major adverse impact on global economic and oil demand forecasts in 2020, particularly for the first and second quarters. Global oil demand growth in 2020 is now forecast to be 0.48 mb/d, down from 1.1 mb/d in December 2019.
Moreover, the unprecedented situation, and the ever-shifting market dynamics, means risks are skewed to the downside.
The Conference noted that the further impact of the COVID-19 outbreak on oil market fundamentals necessitates further continuous monitoring.
Accordingly, in view of the current fundamentals and the consensus on market perspectives, the Conference decided to recommend to the 8th OPEC and non-OPEC Ministerial Meeting to extend the adjustment levels agreed at the 177th Meeting of the Conference and the 7th OPEC and non-OPEC Ministerial Meeting for the remainder of the year.
It also agreed to recommend to the 8th OPEC and non-OPEC Ministerial Meeting a further adjustment of 1.5 mb/d until June 30, 2020, to be applied pro-rata between OPEC (1.0 mb/d) and non-OPEC producing countries (0.5 mb/d) participating in the Declaration of Cooperation.
However, following further consultations, the Heads of Delegation of the OPEC Conference decided to recommend extending the duration of the proposed 1.5 million barrel per day additional adjustment until the end of 2020, instead of June 30, 2020.
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.
The Conference confirmed that its next Ordinary Meeting will convene in Vienna on June 9, 2020
Also at the conference, Ecuador has withdrawn from its Membership of OPEC, with effect from January 1, 2020.
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