Brief high-level remarks by OPEC Secretary General

Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the 24th Meeting of the JMMC, 17 November 2020, via videoconference.

Excellencies, ladies and gentlemen,

I would like to begin by offering our congratulations to Alexander Novak on his promotion to the position of Deputy Prime Minister.  It is a thoroughly deserved recognition of his talents, hard work and diplomatic skills that we have all seen over the last 4-5 years.

We are also extremely happy to see Mr Novak retain the Declaration of Cooperation (DoC) portfolio, and continue to be the reliable, dependable and judicious bridge linking OPEC and non-OPEC.

Since we last met on 19 October, the Secretariat’s home, Austria, has entered its second lockdown, along with many other countries across Europe.

The COVID-19 pandemic shows no sign of abating, ripping through regions, countries and populations as we head into the northern hemisphere winter.  Although the announcement of various COVID-19 vaccines with over 90% efficacy rates, including Russia’s Sputnik coronavirus vaccine, has given a shot in the arm to the economic and oil demand outlook, offering some hope going forward.

Governments have also continued to expand fiscal stimulus measures, with many countries in Europe seeing a further monetary expansion to help their populations as they entered further lockdowns.  Globally, these measures now total more than $20 trillion, including guarantees, equivalent to 20% of global GDP.

It is also important to recognize the leadership of the Kingdom of Saudi Arabia through its G20 Presidency in 2020. The country has been extremely active and supportive of developing countries as they look to navigate a path through the pandemic.

For the oil market, the past month has offered both positives and negatives.  Given the impending 180th Meeting of the OPEC Conference on 30 November, and the 12th OPEC and non-OPEC Ministerial Meeting on 1 December, it is vital that we appraise all the data and analysis, look at how details and numbers have changed since the start of the year and review what has been achieved by the DoC to date.

The global economic growth forecast remains at a negative -4.3% in 2020, which stands in stark contrast to the positive 3.1% envisaged at the start of the year, a staggering drop of 7.4%.

For 2021, we have slightly revised down growth to 4.4%, from the 4.5% we envisaged last month.

It remains a mixed economic picture.  China is a bright spot, with positive growth of 2% in 2020 and other countries in Asia are also exhibiting some positive signs.  However, new lockdowns, second and third waves of COVID-19 and high levels of unemployment, remain major concerns globally.

Evidently, the large fiscal stimulus packages remain supportive, and vaccines offer hope, but the benefits of the latter will take time to trickle through to the real economy, and oil demand growth.

The 2020 outlook for oil demand has been revised lower this month to a negative -9.8 million barrels a day (mb/d), a drop of 0.3 mb/d from our October meeting.  This stands against growth of 1.2 mb/d that was expected in January 2020, a drop of a staggering 11 mb/d.

Additionally, this month we have revised down expected growth for 2021 to 6.2 mb/d, compared to 6.5 mb/d previously.

The recent revisions are due to the slow pace of the economic recovery and recent COVID-19 containment measures, which are assumed to impact transportation and industrial fuel demand well into 2021.

On the supply side, non-OPEC liquids production is forecast to contract by 2.4 mb/d in 2020, compared to expected growth of 2.4 mb/d that was forecast at the start of the year.  For 2021, non-OPEC liquids is anticipated to expand by 0.93 mb/d

It has also been interesting to note that the US oil rig count has climbed significantly over the past month or so, rising from 189 in the week of October 2, to 236 in the week of November 13.

Crude futures in all major benchmarks remain in contango, and in terms of inventories, it is clear that destocking has continued over the past month following the third quarter trend.  In the third quarter of this year, global inventories declined across all components by around 250 million barrels (mb).

It is estimated that OECD commercial inventories fell by 44 mb over this period, non-OECD inventories declined by around 55 mb, and oil at sea, including floating storage, dropped by about 150 mb.

However, the destocking process is taking time, which calls for patience and due diligence.  Preliminary data for October shows that total OECD commercial oil stocks were 260 mb higher y-o-y and 208 mb above the latest five-year average, compared to 13 mb below the five-year average in January 2020.

We need to remind ourselves that total global inventories have surged by more than 1 billion barrels since the beginning of this year, and this would have been much higher without the DoC production adjustments and the high levels of conformity.

We were heading to maximum tank tops if it was not for the historic decisions taken by the DoC.

The overhang remains massive, in both the OECD and non-OECD, and the situation requires vigilance and continuous monitoring, particularly given the large uncertainties going forward.

It underscores that even though we have seen excellent levels of conformity of over 100% and a robust compensation mechanism, the rebalancing process to reach normalized stock levels will spill into next year.

The DoC has achieved some hard win successes in tackling the impact of the COVID-19 pandemic on the global oil market.  With the advent of second and in some cases third waves, we cannot be complacent.

We need to fully understand what is required, and be ready to adapt to any changing market dynamics to ensure we stay on the path that helps restore balance, and a sustainable stability to support growth and investments in the months and years ahead.

We need the courage and flexibility we have all shown this year to take the decisions required ahead, one step at a time, guided by the data and robust analysis.

Before I conclude, since this may be the last meeting of the JMMC before the 4th anniversary of the DoC I feel it is appropriate to applaud the exemplary leadership of the co-Chairs, HRH Prince Abdul Aziz bin Salman and Alexander Novak, who have led from the front during this most extraordinary year in the history of oil.

 And thank all members of the committee and participants in the DoC for their sustained commitment in helping not only turn a new page, but write a glorious new chapter that will shape the global energy transition in the years and decades to come.

Thank you.

HE Mohammad Sanusi Barkindo, OPEC Secretary General

HE Mohammad Sanusi Barkindo, OPEC Secretary General