OPEC bulletin 10/17
F o r u m
As a large oil consumer, India thus shares with
OPEC, and with oil producers and consumers around
the world, a common interest in oil market stability on
a sustainable basis. Along with other oil producers, we
have all seen that constructive dialogue and flexible
cooperation can play an important role in maintaining
stable oil markets.
The historic ‘Declaration of Cooperation’ signed by
24 countries demonstrated that, with firm resolve and
broad consensus, the instability seen in the oil markets,
as well as the sharp contraction of investments in the
industry, the multiplier effect that low oil prices have had
on deflation, and the acute financial stress of companies
and steep reductions in export revenues of producing
countries, all of which have characterized the current and
most vicious of all oil cycles, could be overcome.
Given recent data, it is clear that the efforts of OPEC
and non-OPEC producers to conform to the production
adjustments of the ‘Declaration’ have been fruitful and
worthwhile. Let me share with you the key oil market high-
lights from our latest
Monthly Oil Market Report:
The global economic recovery has gained traction.
OECD economic growth in the 1H17 was better than
expected. Moreover, the goodmomentum and the poten-
tial tax reform in the US, the ongoing dynamic in the Euro-
zone and, to some extent, in Japan, solid growth in China
and India and an improving situation in Russia are all lift-
ing the growth forest to 3.6 per cent in 2017 and 3.5 per
cent in 2018.
The global oil demand growth in 2017 is better than
expected— to grow at 1.45mb/d— and the demand out-
look for 2018 is anticipated to be quite robust at similar
levels — of above 1.4m b/d.
The commercial oil stocks in the OECD have contin-
ued to fall. At the start of 2017, the OECD stock over-
hang was at 338m b above the five-year average. This
has since then fallen by 167m b at a faster pace — by
130m b alone during the last five months — which was
attributed mainly to high conformity levels, above 100
per cent, of participating OPEC and non-OPEC countries,
and stronger oil demand in the second half of the year.
The overhang in stocks nevertheless stood at 171m b
for the month of August. Of this, 146m b constitutes
crude and 25m b products, almost converging with the
In addition, floating storage has also been on a
declining trend during the first eight months of 2017
and is down by an estimated 40m b since the start of the
year, supported by a narrowing contango. In fact, Brent
has flipped into backwardation for the first time since the
second half of 2014.
Just a few days ago, I attended first Russian Energy
Week inMoscow, where I shared a speaking platformwith
President Vladimir Putin, and held talks on oil market
developments with Alexander Novak, Minister of Energy
of the Russian Federation, Khalid Al-Falih, Saudi Arabia’s
Minister of Energy, Industry and Mineral Resources and
also the President of the OPEC Conference, as well as
other OPEC and non-OPECMinisters, all of whom are part
of the historic ‘Declaration of Cooperation’. The state-
ments reaffirmed the broader commitment to joint action
by all for the market stability beyond the short-term.
We all remain confident that the recent extension of
the terms of the ‘Declaration’ — through to early 2018 —
is already accelerating the rebalancing process as con-
firmed by the latest monthly data.
The oil supply and demand variables are fast return-
ing to balance after a record three years of unprecedented
downturn, as evidenced by the continuously positive
fundamentals, due largely to the full and timely imple-
mentation of supply adjustments by OPEC and non-OPEC
Emerging from this most vicious of all oil cycles, the
need to sustain the rebalanced market in the medium-
to long-term, some extra-ordinary measures could be
considered by countries participating in the ‘Declaration
of Cooperation’, including expanding the membership.
This is a shared responsibility of all producers, be they
conventional or non-conventional, short- or long-cycle
investors. We all, at the end of the day, when all is said
and done, belong to the same industry and operate in the
same markets. We urge our friends in the shale basins
of North America to take this shared responsibility with
all the seriousness it deserves, as one of the key les-
sons learnt from the current, unique supply-driven cycle.
The IOCs, independent oil companies and others
have reduced their investments by more than 50 per
cent during two consecutive years in 2015 and 2016.
However, NOCs have not only weathered the storm from
the downturn but have also bravely continued investing
across the supply chain. In this way, OPEC will continue
to be a dependable and reliable supplier of first choice
to rapidly growing countries like India.
OPEC has a vested interest in the sustained healthy
economic growth and prosperity of India.