Opening Remarks by the Chairman of the JMMC

Delivered by HE Issam A. Almarzooq, Kuwait’s Minister of Oil and Minister of Electricity and Water, and Chairman of the Joint Ministerial Monitoring Committee (JMMC), at the 4th Meeting of the JMMC, 24 July 2017, St. Petersburg, Russia.

Excellencies, ladies and gentlemen,
Good morning to you all.

I would like to welcome you to the fourth meeting of the Joint Ministerial Monitoring Committee (JMMC) and start by thanking you all for accepting our invitation to attend this meeting.

It is an absolute pleasure to be in the beautiful and historical city of St. Petersburg. I would like to thank our Russian hosts, especially His Excellency, Alexander Novak, Russia’s Minister of Energy, for the wonderful hospitality shown in facilitating this meeting. Aside from being a gracious host, Minister Novak is to be commended as he has once again reaffirmed his commitment to this committee by continuing to serve as Alternate Chairman.

I hope you all have an opportunity to enjoy this great city. Given St. Petersburg’s cultural heritage there are a multitude of points of interest for you to explore.

Excellencies, Ladies and gentlemen,

Please permit me to take you back to the key milestones that have led to the unprecedented and innovative cooperation between OPEC and non-OPEC producing countries.

The JMMC was established following OPEC’s 171st Ministerial Conference decision of 30 November 2016 and the subsequent historic ‘Declaration of Cooperation’ made at the joint OPEC and non-OPEC Ministerial Meeting of 10 December 2016. At these meetings, 11 non-OPEC oil producing countries cooperated with the 13 OPEC Member Countries in an effort to accelerate the stabilization of the global oil market through adjustments in oil production of around 1.8 million barrels per day.

In support of this historic cooperation, this Committee, which concluded its inaugural meeting on 22 January at the OPEC Secretariat in Vienna, put together a framework of monitoring mechanisms. Part of that framework included the creation of a Joint Technical Committee – the JTC – which met for the sixth time two days ago, on the 22 July, here in St. Petersburg. The mandate of the JTC was to produce, with the support of the Secretariat, a monthly report updating the JMMC on the status of the implementation process.

At the last meeting of the JMMC on May 24 2017, our committee, having considered market conditions and global inventory levels, concluded that it was necessary to extend the production adjustments. The committee also recommended that the duration of the anticipated extension should be longer than the originally envisaged period in the ‘Declaration of Cooperation’ of six months. Having discussed various scenarios presented by the JTC with regard to the extension of the ‘Declaration of Cooperation’, the JMMC recommended that the production adjustments of the participating countries should be extended for nine months, commencing July 1 2017.

The 172nd Meeting of the OPEC Conference and the 2nd OPEC and non-OPEC Ministerial Meeting of May 25, 2017, decided to adopt the recommendations of our Committee. Furthermore, at these meetings it was agreed to expand the mandate of the JMMC to continue to monitor conformity, evaluate market developments and make appropriate recommendations, if deemed necessary.

While our meeting today is the first since the extension of the ‘Declaration of Cooperation’ and expansion of our mandate, our core tasks remain the same, namely ensuring that the objectives of the Ministerial Conference decision and the ‘Declaration of Cooperation’ are achieved through the successful implementation of voluntary adjustments in production. Furthermore, we remain committed to joint cooperation for the achievement of a lasting stability in the oil market – in the interest of oil producers, consumers and the industry.

Excellencies, ladies and gentlemen,

Today, we convene to consider the latest report issued by the JTC and the OPEC Secretariat. We will then discuss the best plan of action necessary to ensure that we achieve our common goals. The comprehensive report of the JMMC will not only contain the monthly data input, but also the Secretariat’s oil market analysis.

I would like to thank the OPEC Secretariat for their staunch efforts and commitment over the past months to support the work of the implementation process through this JMMC and the JTC in the lead-up to today’s deliberations. Furthermore, I would like to thank the JTC for its dedicated efforts to date, and for the very substantive and extended reports it has been providing to us.

Excellencies, ladies and gentlemen,

The implementation of the ‘Declaration of Cooperation’ for the first six months of 2017 saw conformity levels unprecedented in the history of OPEC. This is a convincing demonstration of the willingness of all participating countries to continue their cooperation until the set goal of returning the stock overhang to the five-year average is achieved.

The high conformity levels have played their part in contributing to an absolute reduction in the overhang of OECD commercial stocks of 90 million barrels so far this year. In terms of the latest monthly numbers, total OECD commercial oil stocks in June fell by 15 million barrels compared to May.

It should be acknowledged that some producing countries have over-performed, and they certainly merit recognition for their dedicated efforts. Without their exemplary performance, we certainly would not have seen such high conformity levels. Therefore, allow me to offer my deep appreciation to all those countries for conforming beyond expectation. I hope their excellent performance will motivate other producing countries to reach their own goals – and perhaps to even surpass them.

I think now is an opportune moment to remind all of us, individually and collectively, to remain focused and not lose sight of our aspirations. Despite the progress achieved, I would like to warn against complacency and stress the absolute paramount importance of staying the course and striving to achieve better levels of conformity over the next nine months.

While stock levels have been falling, with a quickening in further weeks, it is important to stress that OECD stocks remain 250 million barrels above the five-year average. Higher supply in North America and an abundance of light crude in the market complicate the fundamentals and these excess volumes will take some time to clear.

Crude oil prices also remain volatile, with Brent prices dropping over $9 from the last meeting of the JMMC to June 21, before witnessing a generally rising trend in the period since. We need stability to return to the market, in the interests of both producers and consumers.

I would like to emphasize the need for patience and perseverance. As the old saying goes, ‘Rome wasn’t built in a day’. The extension of the Declaration of Cooperation is for nine months and it began to take effect on 1 July. Today is the 24 July. There are a total of 274 days in these nine months, therefore, we have not even seen 9% of that time elapse. We need to redouble and focus our efforts as we have 91% of the course still to see out!

Furthermore, the seasonal impact of demand on our production adjustments needs to be taken into consideration. Additional progress remains in sight as world oil market prospects bode well for the second half of 2017. Global oil demand is estimated to increase by close to two million barrels per day from the second to the third quarter this year. The US, in particular, is expected to be responsible for a significant amount of this growth as demand for transportation fuels rises in the summer driving season. Undoubtedly this boost in demand will contribute to further reductions in commercial oil inventories.

Excellencies, ladies and gentlemen,

Each of us is looking forward to the day when investments once again return to healthy levels, and the world economy is strong and robust. This will be well-served if we do our work – and the long-term deepening of ties and ongoing cooperation between OPEC and non-OPEC countries will go a long way to supporting such goals.

I would like to thank you all for your attention.  I will now give the floor over to His Excellency Alexander Novak, Co-Chairman of the JMMC.

HE Issam A. Almarzooq, Kuwait’s Minister of Oil and Minister of Electricity and Water; and Chairman of the Joint Ministerial Monitoring Committee

HE Issam A. Almarzooq, Kuwait’s Minister of Oil and Minister of Electricity and Water; and Chairman of the Joint Ministerial Monitoring Committee