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23

OPEC bulletin 11/17

very sharp decline in oil prices. Pessimism prevailed in the oil mar-

ket. The failure of the variousmeetings between the main producers

was also perceived negatively by the markets, since the production

of OPEC and non-OPEC participating countries accounts for almost

half of world oil supply.

Besides the fact that the ‘Declaration of Cooperation’ aimed at

concrete actions, it was above all extremely credible. Indeed, for

the first time, non-OPEC countries solemnly pledged themselves to

join OPEC through the signing of the ‘Declaration of Cooperation’.

In the medium- and long-term, the ‘Declaration of Cooperation’

will contribute to the stability of the market. It will allow producers

to move towards a convergence of analysis that will support the sta-

bility of the market. Through cooperation, constructive and positive

dialogue, as well as the actions that will follow, the market will be

attentive to the avoidance of destabilization, such as that which it

has experienced in previous years.

Without the ‘Declaration of Cooperation’ taken by 24 producing

nations, what might the oil market and the global economy look

like today?

It should be recalled that before the Algiers Accord of September

2016, low oil prices had damaged investments, which experi-

enced a significant decline that threatened the security of supply

in the medium-term. It would not be speculative to say that with-

out the ‘Declaration of Cooperation’, the oil market would have

continued to be marked by an overhang of oil stocks, generated

by a war of prices and market shares, and by oil prices oscillating

between $20/b and $30/b. I dare not make a projection of the eco-

nomic damage that would have been borne by oil producing coun-

tries and, by extension, industrialized countries. Nothing would

have stopped some producers from producing more to sell more.

Without this Declaration, we would have slowed the production

of shale oil in North America, but we would also have prolonged

the crisis and increased the risk of a future crisis with the delayed

return of shale oil production and a lack of medium-term capacity.

The negative consequences of this on the world economy would

have been devastating.

The ‘Declaration of Cooperation’ will remain a highlight of inter-

national cooperation. I regret that oil producing countries such as

the United States that benefit directly from this agreement could not

allow their companies to cooperate with OPEC, which has shown

to the world great maturity and a responsibility assumed for the

benefit of the world economy.

How do you view oil market prospects for 2018?

The oil market is sensitive to the natural decline of oil fields, the

production of new oil fields, technological changes and global

growth. All of these factors affect the direction the market will take.

However, considering that technological developments can both

favour the production of shale oil and improve global oil supply by

extending the life of mature fields, they will not have a significant

impact in the short-term on global oil supply.

This means that the main driver of the oil market for 2018

will be global growth. This is based on the assumption that (a) an

increase (between 1.4m b/d and 1.5m b/d) of production in the

United States and other non-OPEC producers should satisfy the

increase (between 1.3m b/d to 1.4m b/d) of world oil demand; (b)

the 24 signatories of the ‘Declaration of Cooperation’ will continue

to maintain their adjustments until the end of 2018; and (c) OPEC

will neutralize the ‘special conditions’ of Libya and Nigeria, includ-

ing an increase in the rate of adjustment of production provided

for at the 171

st

Meeting of the Conference on November 30, 2016.

We could then glimpse a resumption of the global stock overhang

and reach the historical average of the last five years prior to 2014

towards the end of the 2Q of 2018.

This situation will have a positive impact on prices, which

will then fluctuate between $60/b and $65/b. Notwithstanding

the fact that the rebalancing of the oil market has already begun,

the 24 producers that adopted the ‘Declaration of Cooperation’

will continue to have a responsibility in 2018 to accelerate this

rebalancing.

Mustapha Guitouni, the current Minister of Energy of Algeria.

Russian Ministry of Energy.