The huge and unprecedented oil market imbalance that faced the industry in April in the wake of COVID-19 pandemic required an unparalleled response from producers, according to His Excellency Mohammad Sanusi Barkindo, Secretary General of the Organization of Petroleum Exporting Countries (OPEC).
Underlining the importance of the two-year agreement, signed by OPEC and non OPEC oil producing countries in the Declaration of Cooperation (DoC) on April 12, and revalidated earlier this month on June 6, Barkindo said he was confident that more stability would return to oil markets in the second half of the year, but more work is required to draw down existing oil inventories to help rebalance markets.
“As we see countries begin to open up, we will see demand start to come back,” Barkindo said. “I remain optimistic but cautious the worst is over and a recovery will be in full swing in the second half of this year, with stocks beginning to be withdrawn. However, what shape the recovery will take, whether a V shape, W or inverted hockey stick, is still uncertain.
“Nevertheless, I am hopeful by the end of this year we will begin to see some further semblance of stability restored to oil markets. Then we will be in a position to move into the next phase of sustaining that stability. Hence the importance of the two-year duration of the historic agreement signed by the OPEC Plus group of countries and non OPEC producers.”
Setting out the scale of the “unprecedented demand destruction” suffered by oil markets in April, Barkindo said oil demand had fallen by 20 to 24 million barrels a day, from a high of 100 million barrels per day, as economic and societal lockdowns, in response to the COVID-19 coronavirus, ravaged the global economy. It led to the largest single supply adjustment in history with OPEC and non-OPEC producers adjusting oil output, including from those outside of the DoC, by almost 20 million barrels a day.
Stressing the criticality to the global economy of restoring stability to oil markets, Barkindo said he had seen projections that forecast a contraction of nearly 20 per cent, or US $1.5 trillion, in energy investments as a result of the volatility and uncertainty around markets.
“Investors in all sectors of the economy are allergic to uncertainties. Therefore, it is important we restore stability and sustainability to oil markets, not only for producing countries but also for consuming countries. Both know a lack of investment in energy today will sow the seeds of another energy crisis in the medium to long term. That would not be in the interests of the global economy,” Barkindo explained.
Turning to the energy transition and the environment, Barkindo said addressing carbon emissions would remain a central challenge for the oil and gas industry post COVID-19. He urged the global community to address the twin challenge of climate change and energy poverty, and added that all energy sources would be needed to meet global demand for energy in the medium to long term.
“There are over 7.5 billion people in our world. By 2040 the global population will increase by 1.6 billion people. Climate change and energy poverty are two sides of the same coin and only the global community, working together, can tackle this issue,” Barkindo said.
The ADIPEC Energy Dialogue is a series of weekly online thought leadership events created by dmg events, organisers of the annual Abu Dhabi International Exhibition and Conference. Featuring key stakeholders and decision-makers in the oil and gas industry, the dialogues focus on how the industry is evolving and transforming in response to the rapidly changing energy market.
ADIPEC attracts more than 155,000 energy professionals from 67 countries; including senior decision-makers and energy industry thought leaders, over 2,200 exhibiting companies and 23 national exhibiting pavilions as oil and gas companies convene to share views and best practices to address the long-term impact of the triple challenge of lower oil prices, weaker demand and over supply.
Held under the patronage of His Highness Sheikh Khalifa Bin Zayed Al Nahyan, President of the UAE; hosted by the Abu Dhabi National Oil Company (ADNOC); and supported by the UAE Ministry of Energy & Industry, the Abu Dhabi Chamber, and the Abu Dhabi Tourism and Culture Authority, ADIPEC is scheduled to takes place at the Abu Dhabi National Exhibition Centre (ADNEC), United Arab Emirates.
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