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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

five-year average.

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


Shared responsibility

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.