Opening Remarks by the Chairman of the JMMC

Delivered by HRH Prince Abdul Aziz Bin Salman, Saudi Arabia's Minister of Energy and Chairman of the Joint Ministerial Monitoring Committee (JMMC), at the 20^th Meeting of the JMMC, 15 July 2020, via videoconference.

Good afternoon.

Allow me first to commend the Co-Chair of the JMMC, HE Alexander Novak, Energy Minister of the Russian Federation, for his leadership and dedication in co-steering this Committee through these challenging times.

I would like to welcome OPEC President HE Abdelmadjid Attar, the new Minister of Energy of Algeria, as well as thank his predecessor, HE Mohamed Arkab, for his commitment and valuable contribution.

As ever, I thank the OPEC Secretariat for the ongoing support provided to these key meetings.

Excellencies, ladies and gentlemen,

The COVID-19 pandemic has had an unprecedented impact on the global economy and global energy markets. But we have, in turn, delivered an unprecedented response.

In April, OPEC+ agreed on the biggest production cuts ever, followed by unanimous commitment to full compliance. These were historic developments.

The meeting of G20 energy ministers underlined the need for a global, synchronized approach.

Against this background, we achieved decisive results. In June, the overall compliance level reached 107 per cent as Saudi Arabia, Kuwait and the UAE made additional voluntary cuts.

Adjusting for previous over-comformity, and even excluding the extra contributions, the level of compliance stood at 95 per cent - a record level.

As I said before, this time it is different. This time, we are acting collectively, with unity and discipline. And we are seeing results.

In June, Opec+ unanimously agreed a regime of compensation for those participants who were unable to fully comply in May and June.

Adhering to this regime is crucial as it reinforces the cohesiveness of our group and the principles of collective action, fairness, and shared responsibility.

The supply side of the oil equation has been firmly and resolutely tackled.

We have momentum in our favour, but we have to resist the temptation to relax.

On the demand side, we see encouraging signs of improvement. Economies around the world are opening up.

Although this is a cautious and gradual process, and there could be localized or partial lockdowns re-imposed in some places, the recovery signs are unmistakable, both in physical and futures markets.

As we move to the next phase of the agreement, the extra supply, resulting from the scheduled easing of the production cut, will be consumed as demand continues on its recovery path.

In addition, seasonality is even more pronounced this year, due to the pandemic. In many Opec+ countries, there will be an increase in demand for utilities, as well as changes in travel patterns, boosting domestic demand for gasoline and diesel.

As a result, the impact on exports for most Opec+ participants will be limited. The additional supply reaching international markets will be barely felt.

I can tell you that in the Kingdom Saudi Arabia, due to the increase in demand from utilities and other sectors, as lockdowns ease, we estimate approximately 500,000 barrels per day of extra demand in August. So, despite a higher production target in August, there will be no change in our exports.

On top of this, the compensation schedules that have been agreed mean that the effective cut will be deeper than the headline figure of 7.7 mbd.

As the cuts ease, those participants that did not achieve full conformity will have the opportunity to meet the compensation targets with relative comfort.

Markets should always look at what is beneath the headline.

There are still risks ahead in this “crisis like no other”, as the IMF described it. The world economy is still learning how to live with the virus.

But we have shown the value of collaboration, commitment and, especially, discipline in facing this extraordinary challenge.

We have delivered on the historic April agreement, and I am confident we have the momentum to see this endeavor through, to our mutual benefit.

As ever, together we are truly stronger.