Adjusts output by 9.7 mb/d for initial period of two months

Puts adjustment at 7.7 mb/d for another six months

To be followed by 5.8 mb/d for 16 months

Market to respond from April 13, 2020 ― Barkindo

THE Organisation of Petroleum Exporting Countries, OPEC, and non-OPEC Meeting has taken far-reaching decisions, targeted at achieving stability in the global market. In the 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting held via videoconference, on Sunday, April 12, 2020, it agreed to, “Adjust downwards their overall crude oil production by 9.7 mb/d, starting on 1 May 2020, for an initial period of two months that concludes on 30 June 2020. For the subsequent period of 6 months, from 1 July 2020 to 31 December 2020, the total adjustment agreed will be 7.7 mb/d.”

The Meeting also agreed that this “will be followed by a 5.8 mb/d adjustment for a period of 16 months, from 1 January 2021 to 30 April 2022. The baseline for the calculation of the adjustments is the oil production of October 2018, except for the Kingdom of Saudi Arabia and The Russian Federation, both with the same baseline level of 11.0 mb/d. The agreement will be valid until 30 April 2022; however, the extension of this agreement will be reviewed during December 2021.”

Declaration of Cooperation

In a statement sent to Vanguard, OPEC stated: “The Meeting reaffirmed the continued commitment of the participating producing countries in the ‘Declaration of Cooperation’ (DoC) to a stable market, the mutual interest of producing nations, the efficient, economic and secure supply to consumers, and a fair return on invested capital.

“The Meeting emphasized the important and responsible decision to adjustment production at the 9th (Extraordinary) OPEC and non-OPEC Ministerial Meeting on 09/10 April. “Furthermore, the Meeting took note of the G20 Extraordinary Energy Ministers Meeting held on April 10, which recognized the commitment of the producers in the OPEC+ group to stabilize energy markets and acknowledged the importance of international cooperation in ensuring the resilience of energy systems.”

Fundamentals

It stated: “In view of the current fundamentals and the consensus market perspectives, and in line with the decision taken at the 9th (Extraordinary) OPEC and non-OPEC Ministerial Meeting, all Participating Countries agreed to reaffirm the Framework of the DoC, signed on 10 December 2016 and further endorsed in subsequent meetings; as well as the Charter of Cooperation, signed on 2 July 2019. “Reaffirm and extend the mandate of the Joint Ministerial Monitoring Committee and its membership, to closely review general market conditions, oil production levels and the level of conformity with the DoC and this Statement, assisted by the Joint Technical Committee and the OPEC Secretariat. Reaffirm that the DoC conformity is to be monitored considering crude oil production, based on the information from secondary sources, according to the methodology applied for OPEC Member Countries. Meet on 10 June 2020 via videoconference, to determine further actions, as needed to balance the market.”

Market response

However, investigation by Vanguard indicated that the market has not yet responded positively to the decision, as prices remained relatively low at an average of $25 per barrel.

Optimism

Nevertheless, in his remarks at the event, the Secretary-General, HE Mohammad Sanusi Barkindo, had expressed optimism that the market would respond positively to the decision from Monday, April 13, 2020. He had stated: “On Thursday and Friday last week, we took the responsive and responsible action to focus on adjusting crude oil production by 10 mb/d beginning on 1 May 2020, for an initial period of two months; then by 8 mb/d from July to December 2020; and by 6 mb/d for the period of January 2021 to April 2022, in the interests of producers, consumers, and the global economy

“It can only be described as a historic meeting, and it built momentum for support at the G20 Extraordinary Energy Ministers Meeting on April 10, with both producers and consumers participating. This was forthcoming in the statement from the G20 meeting with a commitment to work together “in the spirit of solidarity”. It also recognized the commitment of the producers in the OPEC+ group to stabilize energy markets and acknowledged the importance of international cooperation in ensuring the resilience of energy systems. “Now we need to ensure as a group that we deliver on these expectations. We need to iron out any marginal differences to reach a consensus decision. We need to get this deal over the line. The consequences of not finding a solution and unanimity today do not bear thinking about. “The market will react with a bearish ferocity when they open on Monday. We will all bear witness to uncontrolled chaos. It was the great, principled and courageous Nelson Mandela, who once said: ‘Difficulties break some but make others. No axe is sharp enough to cut the soul of a sinner who keeps on trying, one armed with the hope that he will rise even in the end.’ “We need to channel this sentiment. We need to take the lead. The multi-faceted challenges thrown up by the unparalleled COVID-19 pandemic need comprehensive and ‘global’ solutions. I am optimistic that we can seal this deal, with unity and courage for the common cause of oil market stability, in the interests of all stakeholders.”