Three days in June

OPEC Bulletin Commentary June 2015

Three June days in Vienna encapsulated in a microcosm many of the issues and challenges currently facing the global oil market.

The first two days saw the 6th incarnation of the triennial OPEC International Seminar; five-focused sessions of dynamic and informative debate, with participants from all over the world, and from a wide variety of the industry’s stakeholders: OPEC and non-OPEC oil ministers, the heads of national and international oil companies, international organizations, global banking institutions and oil traders, to name just a few. And the final day of the three saw OPEC Member Country Oil and Energy Ministers come together for the 167th OPEC Ministerial Conference.

The Seminar proved to be a major success, thanks to all those involved: the organizers, the speakers, the moderators, the attendees and the media. In the regal surroundings of the Hofburg Palace, around 800 attendees gathered to hear speeches and discussions centered on a broad plethora of industry challenges and uncertainties, as well as opportunities.

This included the current oil market environment; upstream, midstream and downstream developments in various countries and regions; the role of financial markets and oil market speculation; energy policies in some consuming countries; the potential impact of UN climate change negotiations; manpower bottlenecks; industry costs; advances in technology; and the producer and consumer dialogue.

In general, it was evident that the industry is still digesting and looking to better understand the shifts in the global oil market that have been observed over the past year. There were plenty of viewpoints on how the industry might look after this downturn, but there was near unanimous opinion that the industry could remain optimistic over its future. There was no doubt that the world will need more oil in the decades ahead.

The overall focus for all was on the one thing we all desire: market stability, with a healthy balance between supply and demand and where both producers and consumers are satisfied.

The issue of market stability, as well as many of the challenges and uncertainties deliberated on at the Seminar, was also clearly on the mind of OPEC Ministers when they met for the 167th OPEC Ministerial Conference at the Secretariat the day after the Seminar ended.

After reviewing developments since the last OPEC Ministerial Meeting in November 2014, the current market conditions and the expectations for 2016, the Conference resolved to maintain the 30 million barrels/day ceiling and urged Member Countries to adhere to it. The decision was a reaffirmation of OPEC’s collective decision-making process, with all Members in agreement, and a reconfirmation of their commitment to a stable and balanced oil market.

There is no doubt the current market environment is challenging — it is a test for oil producers and investors everywhere. But we should recognize that the industry has seen a number of cycles and changes in the past that have required it to adapt and evolve, just as it is doing now.

From OPEC’s perspective, each challenge the Organization has faced in its history, whether that be on the demand- or supply-side, or in the short-, medium- or long-term time horizons, has had distinct differences. It means that each challenge has required OPEC to evolve, and where necessary, develop distinct responses.

For example, in the early years, the Organization had to contend with predictions that it would not last long; in the 1970s there was the need for Member Countries to take more control of their domestic petroleum industries; in the 1980s there was the need to react to a drop-off in demand; in the 1990s there was the South-East Asian economic downturn; in the first decade of the century we initially saw a significant increase in demand, followed by the financial downturn in 2008; and over the past few years the market has seen rising supplies from non-OPEC producers.

Just as the market has evolved, OPEC has done too. None of us can stand still, or just look to past history when searching for solutions to current challenges.

In this regard, as was in evidence at the Seminar, there is an increasing appreciation of the importance of continually enhancing and building better cooperation and dialogue among all industry stakeholders. The global oil market is an ever-shifting entity; one that requires constant monitoring and appropriate actions from all those involved.

As the three days and two events in June underscored, OPEC has, and will continue to play an important part in helping achieve the market stability we all desire in the coming decades. And we will continue to be pragmatic and realistic in meeting the challenges, as well as the opportunities, that lie ahead.

OPEC Bulletin June 2015

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