A partnership of common interests

OPEC Bulletin Commentary December 2017-January 2018

Albert Einstein once wrote: “Nothing truly valuable can be achieved except by the unselfish cooperation of many individuals.” This powerful truism has been evidently fundamental to the success of the joint endeavours of 24 OPEC and non-OPEC producers over the course of 2017, for at the core of the historic ‘Declaration of Cooperation’ is an age-old, yet profoundly effective problem-solving mechanism: partnership.

The way a partnership works as a whole determines its success. There may be partnerships formed with great individuals; but if they do not work with common interests and goals in mind, then the partnership is not likely to achieve success. In contrast, the first year of the ‘Declaration of Cooperation’ reflects the unity and focus required to deliver a successful partnership.

The Declaration has been built on the back of the key elements that have helped evolve all successful partnerships: trust, mutual respect, honesty, transparency, a shared vision, and clear objectives. It has been a collaborative and committed global partnership between oil producing nations to help return balance and sustainable stability to the oil market.

This was evidently brought to the fore at the 173rd Meeting of the OPEC Conference and the 3rd OPEC and non-OPEC Meeting, both held in Vienna on November 30, 2017. The two back-to-back meetings — with around 200 delegates who were joined by over 250 journalists and analysts — saw participants discuss the progress made in the ‘Declaration of Cooperation’, the global oil market outlook for 2018, and the report and recommendations made by the Joint Ministerial Monitoring Committee (JMMC) from the previous day.

Delegates specifically recognized the importance of the decisions taken at the 172nd OPEC Conference and the 2nd OPEC and non-OPEC Meeting, both held on May 25, 2017, to extend the ‘Declaration of Cooperation’ for a further period of nine months to the end of March 2018. The market trajectory and sentiment witnessed in the period since has shown that the extension decision was right and timely, despite the initial market response. This has been evidently vindicated by the fact that the rebalancing trend has quickened since May 2017. There has been an acceleration in the reduction of the stock overhang, driven by the unprecedented high conformity levels to the voluntary production adjustments; global economic growth is healthy; and oil demand growth has been on the rise, for both 2017 and 2018.

All industry stakeholders are benefitting from improving market fundamentals, and optimism has replaced the pessimism that has been prevalent in the industry for far too long.

There are clearly many encouraging signs. But it was also noted by many ministers at the meetings that the market rebalancing cannot be taken for granted.

This was noted by Khalid A Al-Falih, President of the OPEC Conference, and Minister of Energy, Industry and Mineral Resources of the Kingdom of Saudi Arabia, in his opening remarks to the 173rd Meeting of the Conference. “History tells us that as we get closer to the goal, commitment can start to waiver. So, to achieve our goals on a sustainable basis, we must stay the course, with each Member Country taking full responsibility for its own contributions and not relying on others. That is the only way to succeed.”

The emphasis is on remaining vigilant and steadfast, which was evident in the outcome of the two November 2017 meetings, with the ‘Declaration of Cooperation’ amended to take effect for the whole year of 2018 from January to December. In addition, there was a pledge for full and timely conformity of OPEC and participating non-OPEC countries in accordance with the voluntary production adjustments.

The decision was a clear vindication that not only is this OPEC and non-OPEC partnership holding together and producing results: it is flourishing. The ‘Declaration of Cooperation’ has all the elements in place to further evolve into an essential feature of the consensus building required to rebalance and stabilize the global oil market.

It was also further cemented by the participation at the 3rd OPEC and non-OPEC Meeting of an additional six non-OPEC producing countries — Chad, Congo, Egypt, Turkmenistan, Uganda and Uzbekistan — and their public declarations of support. Together, 30 oil producing countries — the largest partnership of its kind — reaffirmed their commitment to restoring stability to the oil market on a sustainable basis, in the interests of producers, consumers and the global economy.

Moreover, there is also a focus on institutionalizing this framework that builds on this unparalleled global platform of stability, going beyond the short-term to look at the broader challenges and opportunities the oil industry will face in the years and decades to come. It is vital to remember that the short-, medium- and long-terms are all interlinked. All are equally important and none can be viewed in isolation.

As the great Henry Ford once said: “Coming together is a beginning; keeping together is progress; working together is success.” It is vital to ensure that the ‘Declaration of Cooperation’, which remains open to other producers, is a partnership that works for everyone, across all timeframes, to help deliver the sustainable market stability we all desire.

OPEC Bulletin December 2017-January 2018

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