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C o m m e n t a r y

On the right track

After several months of historical decisions and unwavering

dedication by OPEC Ministers and their non-OPEC counter-

parts to the ‘Declaration of Cooperation’, participants once

again showed the world their mettle at their recent ministe-

rial meetings in Vienna, continuing to lead global efforts to

stabilize the world’s oil market.

The main outcome of the 172


Meeting of the Conference

and the 2


OPEC and non-OPEC Producing Countries’

Ministerial Meeting, which took place at the OPEC headquar-

ters on May 25, 2017, was an extension of production adjust-

ments for a further period of nine months, with effect from

July 1, 2017. The decision once again underscored OPEC’s

importance as a positive force in the market, alongside par-

ticipating non-OPEC countries, to the benefit of all produc-

ers, consumers, the industry and the global economy.

The conclusion was reached after considering various in-

ternal reports, as well as the recommendations made by the

Joint Ministerial Monitoring Committee (JMMC), supported

by the Joint Technical Committee (JTC).

These two bodies had been set up last year to monitor

conformity to the original production adjustments made by

13 OPEC and 11 non-OPEC producing nations, which result-

ed from the 171


OPEC Ministerial Conference on November

30, 2016, and the unprecedented OPEC and non-OPEC

‘Declaration of Cooperation’ on December 10, 2016.

The very high level of commitment on behalf of OPEC

Members and participating non-OPEC nations has been re-

flected in the unprecedented conformity levels to last year’s

adjustment decision, which has increased month-on-month

during 2017. In May 2017, the combined conformity level

reached 106 per cent, an increase of four percentage points

over the previous month.

What could be a clearer demonstration of the power and

efficacy of dialogue and cooperation?

There have evidently been many sceptics throughout this

process of consultations and negotiations, many fromobserv-

ers who did not believe that OPEC Members could find unity

among themselves. There were also many who were doubt-

ful that any kind of unanimity could be found with non-OPEC

producers. And there were also many who believed that the

‘Declaration of Cooperation’ would not be fulfilled. The devel-

opments of thepast sixmonths have surelyproven themwrong.

In fact, the actions of the Organization and its Member

Countries constitutewhat couldbe called ‘vintageOPEC’. They

have shown the courage, diligence and spirit of compromise

that have always been hallmarks of the Organization — and

the world today continues to look to OPEC to carry on with

its good work.

It is worth underscoring the fact that the ‘Declaration of

Cooperation’ is unparalleled in the history of the oil industry.

However, given the nature and severity of the downturn of

the last several years, such a concerted, collective effort was

required. No one could have acted alone — and the continu-

ation of such a broad commitment has been necessary to en-

sure that the desired objectives are kept in focus and finally


Although the rebalancing of the market has taken longer

than originally envisaged at the end of 2016, the expecta-

tions are that we are well on our way to a return to more de-

sirable market conditions. Still, all participating countries

must ensure that they continue to carry on as they have

been and maintain their commitments and conformity to

the adjustments.

It has been evident that the slower than expected rebal-

ancing process in the first half of this year has been due to

the regular early year seasonal changes that can soften the

market, as well as to a sudden pick-up in US tight oil pro-

duction. But despite this and other sources of uncertainty

in recent months, we believe the groundwork has been laid

for stronger stabilization and a more consolidated recovery

during the second half of the year.

In short, we are still in the midst of a broad rebalancing

process and, consequently, there are still important issues

which need to be addressed. We are not entirely out of the

woods, and the market environment remains a challenging

one for producers and investors.

In addition, the discussions and consultations undertaken

over the past year have opened up an exciting new chapter

in our Organization’s interactions and relations with other

market stakeholders — non-OPEC nations, shale oil produc-

ers, financial actors, consumers and the broader international


Such a spirit of dialogue among energy stakeholders may

have important, long-lasting reverberations. It may even

serve to help protect the market from severe price cycles in

the future.

Another outcome of this entire process has been an up-

surge in optimism among oil majors and national oil compa-

nies, despite the lingering short-termmarket challenges. This

has been demonstrated by an increase in recent E&P agree-

ments and deals and a rise in investments following two years

of decline. Ingenuity, innovation and investments are vital to

the long-term future of this vital global industry.

All things said, we believe we remain on the right path.

The enthusiasm and commitment shown by OPEC and par-

ticipating non-OPEC oil producing countries in the rebalanc-

ing process is a good omen for the future of the market and

global economic stability.