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14

OPEC bulletin 3–4/17

C E R A W e e k

CERAWeek 2017

Resources and OPEC Conference President for 2017,

highlighting “green shoots” in the recovery. Talk focused

more on investment, growth and new jobs, rather than

retrenchment, withWTI hovering around $53/b when the

event began on March 6.

Moreover, the five-year average for the OECD stock

overhang had fallen from 380 million barrels in February

2016 to below 300m b at the start of the conference,

although US crude stocks remained persistently high,

due mainly to lower refinery throughput, coupled with

increasing US production in a seasonally low-demand

period in the first quarter of the year. In addition, WTI net

long positions had increased from just 110,000 contracts

to around 380,000, a record high level, over the period

between the 2016 and 2017 CERAWeek conferences.

OPEC Secretary General, Mohammad Sanusi

Barkindo, stated that he was “optimistic, we want to

believe the worst is over going forward … the atmosphere

is changing to the positive as we look to restore stability

and normalcy.”

With Yergin and Birol

This sentiment was evident in a two-man plenary ses-

sion at CERAWeek 2017 with the OPEC Secretary General

and Dr Fatih Birol, Executive Director of the International

Energy Agency (IEA), sharing the stage. The energy dia-

logue was moderated by Daniel Yergin, Vice Chairman,

IHSMarkit, and Chairman of CERAWeek, who introduced

his guests as “two people who have great insight into

present and future energy markets.”

Barkindo and Birol both made reference to the more

upbeat mood, compared to CERAWeek 2016, with talk

of the market realigning and investments returning.

Barkindo said “we [the industry] are on course” in terms

of market rebalancing, which is essential if the indus-

try is to sustain the returning industry confidence. For

OPEC, he said, the focus is on the 2016 landmark deci-

sions reached by the Organization and non-OPEC at the

end of last year. He stressed that the main objective of

these was to reduce stock levels and quicken the mar-

ket rebalancing process. “Inventory levels had become

unsustainable and out of balance for too long”, he said,

and it had become “vital to address this variable.”

To date, Barkindo said “conformity with the volun-

tary production adjustments had been encouraging and

commitment remains very high,” but he stated that “all

participating countries should aim for 100 per cent con-

formity.” He added that on May 25, at the 172

nd

Meeting

of the OPEC Conference, “we will look to see how far we

have gone in accelerating that drawdown of stocks and

bringing the level closer to the five-year average.”

Birol underscored that the return of more certainty

to the market had seen investments rebound in the

United States tight oil sector. He saw the “new wave

of shale growth” as a positive sign for the industry, but

stressed that global investments needed to resume at

a much higher level so as to ensure that supply growth

does not stall by 2020. The Executive Director noted

that the downturn in investments in 2015 and 2016

was unprecedented for the industry and underscored

that he saw the return of sustainable global invest-

ments “without delay” as the main issue for the indus-

try. His message to the oil industry, he said, is “invest,

invest and invest.”

The Secretary General concurred, acknowledging that

it was essential that investors also looked to sustaina-

ble long-cycle project investments to complement those

currently being made in short-cycle projects. “Our eyes

need to be on long-term investment that is the baseload

for the industry,” he said.

The importance of this was emphasized in the fact

that both heads of OPEC and the IEA agreed that they

did not see an oil demand peak for the foreseeable

future. Demand remained robust, said the Secretary

General. He highlighted figures in OPEC’s

World Oil Outlook 2016

,

which sees world oil demand increasing

by around 17 million barrels/day between 2015 and

2040, with oil-related investment requirements of $10

trillion over this period.

Both Barkindo and Birol accentuated the many pos-

itives of the ever-evolving dialogue between OPEC and

the IEA that included talks and cooperation at the exec-

utive level and various workshops and meetings at the

technical level. Moreover, Barkindo said the produc-

er-consumer dialogue between the two organizations,

as well as with the International Energy Forum (IEF), and

its new Secretary General, Dr Sun Xiansheng, who was

also present in Houston, was developing “not only in the

interests of OPEC Members and IEA members, but in the

best interests of the global community.”

North American outreach

The OPEC Secretary General also saw CERAWeek 2017

as an ideal opportunity to further the Organization’s

North American outreach, particularly with the inde-

pendent producers that had driven the US tight oil boon