Remarks 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 10th Meeting of the JMMC, 23 September 2018, Algiers, Algeria.

Introduction and Salutations

Your Excellencies, Ladies and Gentlemen: good morning.  I want to welcome you all to the JMMC meeting, as we review the findings and analyses of our Joint Technical Committee, deliberate on current market conditions, assess their future direction, and strengthen our continued collaboration that is so important to oil market stability.

On behalf of everyone here, I would like to express our appreciation to the state of Algeria under the leadership of His Excellency the Honorable Abdulaziz Bouteflika, as well as to the entire Algerian organizing team led by the Algerian Minister of Energy HE Mustapha Guitouni, for their gracious hospitality and warm welcome to this historic city, and for their diligent efforts in hosting our gathering.  I think I speak for everyone when I say that last night was one to remember for the fantastic dinner and folklore show we have all enjoyed.

OPEC and non-OPEC have continued to work well together

Despite a complex and challenging environment over the past several months, which has been shaped by the confluence of a wide range of market and non-market factors, I’m delighted that our partnership of OPEC and non-OPEC producers continues to work well and to produce admirable results.  I am also pleased to note that both the JMMC and the JTC have made outstanding efforts in demanding circumstances.

I would like to thank both the Joint Technical Committee and every one of my JMMC colleagues for their cooperation and to congratulate them on the favorable results that have been achieved.

I would also like to express a special note of appreciation to HE Suhail Al Mazrouei, the UAE Minister of Energy & Industry and President of the OPEC Conference, HE Alexander Novak, the Minister of Energy of the Russian Federation, and HE Mohammad Barkindo, Secretary General of OPEC, for their personal contributions to these successes.

Current market situation is satisfactory

My friends, as we all are acutely aware, oil market stability is critically important to the health of the entire global economy and particularly the prosperity of developing nations whose economies require an ever increasing amount of energy for their growth and prosperity.  So, we fully recognize that oil should act as a lubricant that helps to propel and accelerate economies, and not as a headwind which slows them.

Ladies and gentlemen, I’m delighted to note that our joint efforts have played such a pivotal role in achieving the current level of market stability despite the wide ranging challenges that the market had to endure.

Also in my view, the high degree of reassurance that our efforts provided to consuming countries during times of market uncertainty have been equally important, and served everyone well.  In hindsight it is clear that our decision to ease supplies was the right one taken at the right moment, although there were some who questioned that decision at the time.

With this scene set, I want to briefly review the key fundamental aspects underpinning the market stability. In the interest of time, let’s quickly look at each of them.

  • One, while the supply-demand balances remain satisfactory, we continue to closely watch them and will respond appropriately and in a timely manner, as necessary.
  • Two, when it comes to oil demand, we see fairly healthy growth in the proximity of 1.5 million barrels per day on average this year, and the next.  This is quite encouraging but must be seen with caution in light of the lingering concerns over global trade and tariff issues and currency crises in some developing economies, and their potential implications for the global economy.
  • Three, while inventories have been fluctuating due to shorter-term factors, the broader inventory trend remains reassuring with both US and OECD inventories falling to their five-year average range [Note: they are slightly below five-year averages]. Forward day cover is also at healthy levels.
  • Four, investment is also flowing back into the industry, as increased market stability inspires greater confidence in the petroleum sector.  Given the time horizons of such expenditures, renewed investment activity is a vote of confidence in the industry’s long-term prospects.

And when it comes to the functioning of our joint efforts, the OPEC and Non-OPEC cooperation has remained strong, which has without a doubt played a key role in creating market stability.

Complex upcoming situation anticipated

Of course, while the current situation is satisfactory, the global economy and oil markets are rather fragile, and we cannot afford to slip into complacency, especially in light of the complexities and challenges that appear on the horizon.  This involves geopolitical, macro-economic, as well as oil supply and demand uncertainties.

So, in light of these intricacies, what would be a logical strategy looking toward the future?

Clearly and simply, it is critical that we continue to foresee and anticipate changing market supply and demand balances and take proactive actions to avoid conditions that could make consumers uneasy and anxious.

In particular, that means availing adequate supplies and avoiding any shortfalls in the market.  Uncertainty and anxiety not only erode oil demand but also undermine the broader market environment, which could easily tip into instability on either side of the supply-demand equation.

Continued deliberations with consumers are also important

In addition to our current JMMC framework, I strongly believe that continued candid dialogue with consumers is also an important part of our joint strategy going forward.  Such engagement not only provides us with an opportunity to better understand the viewpoints of our consumers, but also to inspire greater confidence among them and create the conditions to sustain a more stable market.

Importance of continued OPEC/non-OPEC cooperation

Looking further into the future, as previously indicated we continue to work on creating suitable longer term mechanisms for cooperation between OPEC and non-OPEC producers, which will ensure that the market is well-monitored, well-supplied, and well-balanced, as well as injecting confidence into it.

Last, but not least, as we approach the end of this year, we must start working on our plans for collective action to keep the market balanced in 2019.  I believe we must use the remaining time before the Ministerial Meetings in December to prepare proposals for 2019 production.

Concluding Remarks

In summary, ladies and gentlemen, we can take a good deal of satisfaction from the current oil market situation which in large part is the result of sustained cooperation between OPEC and non-OPEC producers.  While a more challenging environment is anticipated on the road ahead, and some volatility seems to be returning to the market, I remain confident in our joint ability to provide sufficient supplies in the short-term and maintain market stability in the mid-term by acting in a measured, deliberate and timely manner.

For the long-term our proposed new framework for OPEC and Non-OPEC cooperation will provide assurance that markets will remain under stewardship.

Because market conditions are a function of factors related to both supply and demand, though, I want to stress that the economic wellbeing of consumers will remain a key priority of ours, especially when it comes to more fragile developing economies.  And in order to develop and deliver on a longer-term strategy for sustained market stability, I expect our cooperation with non-OPEC producers to continue well beyond this year.

Again, I thank each of you for your efforts to help achieve the positive market conditions we see today, and for your continued cooperation and constructive engagement in the future.  I also reiterate my gratitude to our hosts for their gracious hospitality. Thank you.

HE Khalid A. Al-Falih, Saudi Arabia's Minister of Energy, Industry and Mineral Resources; and Chairman of the JMMC (r); and HE Mohammad Sanusi Barkindo, OPEC Secretary General

HE Khalid A. Al-Falih, Saudi Arabia's Minister of Energy, Industry and Mineral Resources; and Chairman of the JMMC (r); and HE Mohammad Sanusi Barkindo, OPEC Secretary General

The 10th Meeting of the JMMC takes place in Algiers, Algeria

The 10th Meeting of the JMMC takes place in Algiers, Algeria