OPEC : Speech by the Chairman of the JMMC

Speech by the Chairman of the JMMC

Delivered by HE Khalid A. Al-Falih, Saudi Arabia's Minister of Energy, Industry and Mineral Resources; and Chairman of the Joint Ministerial Monitoring Committee (JMMC), at the 9th Meeting of the JMMC, 21 June 2018, Vienna, Austria.


Salutation and Introduction

Your Excellencies and Distinguished Guests, welcome to the lovely and historic city of Vienna, where more history will be written this week as we continue our efforts, which have already produced gratifying results, to advance market stability for the benefit of both producers and consumers.

I would be remiss if I did not acknowledge the great help provided by my Co-Chair, HE Alexander Novak, the Minister of Energy of the Russian Federation, who just arrived from Moscow for our meeting.

I would like to also welcome several distinguished colleagues to the Joint Ministerial Monitoring Committee, including:

  • HE Kanat Bozumbayev, Minister of Energy of the Republic of Kazakhstan
  • HE Jabbar Al-Luiebi, Minister of Oil of the Republic of Iraq
  • HE Bijan Zanganeh, Minister of Petroleum of the Islamic Republic of Iran; and
  • HE Dr Aldo Flores-Quiroga, the Deputy Secretary for Hydrocarbons at the Ministry of Energy of Mexico.
  • [Others]

Our discussion is taking place at a time of anxiety in many quarters about a supply deficit and this is materializing with inventories dropping below the 5 to 7 year average.  There are calls from many major consuming nations for OPEC and our partners to take this important factor into consideration when making decisions.  In my brief remarks, I would like to give special attention to this aspect of our deliberations.

Market developments

Before discussing our future course of action, though, I would like to take this opportunity to express my thanks to all members of the Declaration of Cooperation and our non-OPEC partners for their contributions over the past 18 months, which have had a demonstrably positive effect on the market.  Over the past year and a half, conformity by the members has collectively exceeded 100 percent, and as a result, OECD commercial stocks have declined by some 370 million barrels, which many thought impossible when we began.

There is no doubt that OPEC and its partners have done an incredible job of returning the global oil market to health and stability—but that success would not have been possible without the sound analysis of market fundamentals that underpinned our decisions along the way.

The Joint Technical Committee, under the guidance of the JMMC, has done a remarkable job in that regard and has made our job at the ministerial level relatively easy.

On behalf of the entire JMMC, I would like to express our appreciation to the members of the Joint Technical Committee for their continued diligence and dedication.

As we are all aware, while the current market is strong and the long-term picture remains healthy, there could be bumps in the road ahead and the path could be tortuous.  This means new challenges are certain to emerge.  Each new development is unique and requires its own bespoke solution and response.

Continuous Market Stability

As I have stated before, to better deal with these challenges and complexities, we need to build upon our successful cooperation model and institutionalize its success through a broader and more permanent strategically focused framework.  Such an approach allows us to continually monitor the market from 360 degrees; is capable of gauging a more complex, more rapidly evolving market; and is ready to proactively respond as the market evolves or events intervene.

In fact, we are already starting to face this changed situation and if we did not suitably adjust our course, we will run into a different set of problems than before, losing credibility with consumers across the world, and especially in developing countries where most growth is expected to be.  Let me elaborate.

Demand in the second half will be more than the first half by two million barrels per day.  And over the two years since the DOC went into effect, total global demand has increased by more than three million barrels while our supply has declined by 2.8 MMBD.  OPEC analysis indicates that if we took no action, the supply deficit in the second half of the year could rise to an unacceptably high figure of 1.7 million barrels per day, and OECD inventories would be further drawn down by another 300 million barrels.  But the downside does not stop there.  This evolving situation could have an exceedingly negative impact on oil demand growth.

Another important factor that is starting to increasingly assert itself, and which we ought to keep in mind, is that the main growth engine in US shale oil production, the Permian, is coming under considerable downward pressure owing to pipeline infrastructure and resource constraints.  That means the expansion of US shale oil is likely to significantly slow over the coming two years until those hurdles are resolved.

Returning to the growing importance of the work that the Joint Technical Committee and the JMMC do, our vision of a more effective and more inclusive OPEC and Non-OPEC partnership will only materialize and succeed if it is grounded in proactive, thorough and holistic analysis.  Therefore, the work of these committees is taking on an ever greater significance.  But based on the performance and achievements we have seen to date, I am confident that we and our committees are up to the task.

Conclusion

[Ladies and] Gentlemen, to recap, we need to be cognizant of market developments and to build on the current successes achieved through collective and more comprehensive action by OPEC and our non-OPEC partners led by Russia.

Our customers have spoken loudly and we must listen to them.  We need to be responsible and responsive by releasing the right level of supplies.

And finally, let me reiterate that whatever decisions we take this year, next year and future years will require further action.  In this environment, the role of our market monitoring and analysis mechanisms and the need for enhancements becomes even more critical.

Through a permanent and more inclusive cooperation framework that will help to ensure the long-term stability and sustainability of the oil market and impart it greater confidence—thereby making history even as we look toward the future.

Thank you for your attention today.

HE Khalid A. Al-Falih, Saudi Arabia's Minister of Energy, Industry and Mineral Resources; and Chairman of the JMMC

HE Khalid A. Al-Falih, Saudi Arabia's Minister of Energy, Industry and Mineral Resources; and Chairman of the JMMC

The 9th Meeting of the JMMC took place at the OPEC Secretariat in Vienna, Austria

The 9th Meeting of the JMMC took place at the OPEC Secretariat in Vienna, Austria