OB 03_04.2017
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C o m m e n t a r y

Stability through cooperation — it works!

OPEC’s ‘Declaration of Cooperation’ with a group of

non-OPEC oil producers, set up in December last year

to speed up the rebalancing of the international oil

market, is already showing promise. In just the first

two months of the initial six-month plan, which com-

mits 24 leading oil producers to a production adjust-

ment totaling around 1.8million barrels/day of crude,

the results have been above expectations.

In January, a conformity level to the adjustment of

86 per cent was achieved. That was already impres-

sive bearing in mind the logistics involved in imple-

menting changes to one’s production, which is not as

simple as just switching oil taps on and off. But if the

January performancewas pleasing, then February data

proved to be emphatic!

The second meeting of the Joint Ministerial

Monitoring Committee (JMMC), set up under the

‘Declaration of Cooperation’ to oversee the enact-

ment and progress of the initiative, announced in

Kuwait City in March that the January figure had been

exceeded in February by eight percentage points —

to 94 per cent! There were understandably a lot of

smiling faces. But it got even better. In looking at the

numbersmore closely, it quickly became apparent that

some of the participating countries had actually over-

conformed in February. By producing less than their

individual targets, they had effectively made up the

shortfall from some other countries that had not yet

been able to reach their assigned levels, for one rea-

son or another. That is cooperation on a grand scale

and certainly never seen before in OPEC’s history.

Actually, the conformity figure could be even bet-

ter still. According to the

Reuters

news agency, which

is also tracking events, its survey has the level at 95

per cent for February. Whatever number is correct,

it just goes to prove to the international community

what can be achieved when coordinated teamwork

is applied by a group of concerned and responsible

sovereign states that are firm in their beliefs, serious

in their intentions, and methodical in their actions.

It certainly augurs well for the future of this alliance

whichwill very likely be called upon again and again to

exercise similar unity of action to correct other market

disturbances in the testing years ahead. But one really

has to consider the true significance of this coopera-

tion. The adjustments by the producers involved are

purely voluntary and they are effectively putting the

betterment of others and the welfare of the interna-

tional petroleummarket as a whole ahead of valuable

revenue-earning potential. This selfless act iswhy this

whole process is truly historic.

From its inception way back in 1960, OPEC has

been committed to twowatchwords—stability and co-

operation. The Organization is convinced that achiev-

ing stability through cooperation works — and is the

best way forward for an industry that will always need

to answer various challenges. The 24 nations that are

working closely under the ‘Declaration of Cooperation’

are proving that it brings positive results. Obviously,

OPEC would now like to see the number of producers

signed up to this worthy initiative expanding. The

simple fact is that the more countries it can get on

board, the more effective the cooperation will be for

restoring lasting oil market stability — and in a sus-

tainablemanner. Surely, with all industry stakeholders

standing to gain from the current landmark efforts, it

is only right and fair that everyone plays their part in

the implementation of the production adjustments —

however big or small — to ensure the initiative’s total

success.

Of course, having been in the petroleum business

for over half a century, OPEC is under no illusion as to

the magnitude of the task in front of it. The interna-

tional oil market is quite unique among all the com-

modity exchanges operating in the world today. It is

extremely complex and sensitive to all manner of in-

fluence, both internal and external, and will clearly

require continued vigilance and close monitoring on

a daily basis.

As everyone in the industry agrees, fossil fuelswill

continue to play a leading role in global energy supply

in the future. This fact makes what the OPEC and non-

OPEC producers are attempting to do in the market

right now even more imperative. Demand for oil and

gas will grow considerably in the years ahead so it is

vital to have the right conditions in place that support

investment in new and existing capacity, which OPEC

calculateswill amount to some $10 trillion up to 2040

to satisfy burgeoning demand. That requires a market

that is stable, predicable and sustainable. The coop-

eration the industry has been witnessing since the

start of the year is the key to the oil market’s future

success. It just needs what is being done right now

to be even bigger and bolder. With everyone pulling

in the same direction and putting unity and coopera-

tion before self-interest, the future will take care of

itself. And with stability restored, everyone stands to

benefit.