As oil demand begins to recover after falling to a record low in April, the Organization of the Petroleum Exporting Countries, OPEC+ group has agreed to ease the record 9.7-million-BPD production cuts from August.
Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, made this known at the OPEC+ panel meeting on Wednesday.
According to the original agreement from April, OPEC+ was to cut 9.7 million BPD in combined production for two months—May and June—and then ease these to 7.7 million BPD, to stay in effect until the end of the year. Then, from January 2021, the production cuts would be further eased to 5.8 million BPD, to remain in effect until end-April 2022.
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Bin Salman observed that there were encouraging signs of improvement as economies around the world open up. While there could be localized or partial lockdowns re-imposed in some places, the recovery signs are clear, both in physical and futures markets.
He expressed optimism that, moving to the next phase of the agreement, the extra supply resulting from the scheduled easing of the production adjustment will be consumed as demand recovers.
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Also, Mohammad Sanusi Barkindo, OPEC’s Secretary-General disclosed that the actions taken on 12 of April 2020 at the 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting, and then supplemented at the 179th OPEC Ministerial Conference and the 11th OPEC and non-OPEC Ministerial Meeting on 6th of June, 2020 where the production cut deal was sealed have helped reintroduce a semblance of stability to the market.
“Our decisions were well-informed and well-communicated, and they provided reassurance to the market that the OPEC+ group is proactive and fully observant of the ever-evolving oil market fundamentals.
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Further evidence of the attentiveness of the OPEC+ group was seen after the last Joint Ministerial Monitoring Committee, JMMC, with Participating Countries that had been unable to reach the full 100% conformity in May and June submitting plans to the OPEC Secretariat to accommodate this in July, August and September, in addition to their already agreed production adjustment for those months.
This ensures that the Declaration of Cooperation DoC remains fair, timely, and equitable, and again gives comfort to the market that we are fully focused on our objectives of expediting the rebalancing process.
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It has been positive to see all participants vocalize their support for 100% monthly conformity. Looking ahead, each of us now needs to double down on the unanimous decisions we have made, fully execute the plans in place for the coming months, and reinforce the commitment of OPEC+ to a balanced and stable market” he said.
