Opening Remarks by OPEC Secretary General

Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the 47th Meeting of the Joint Technical Committee (JTC), 3 January 2021, via videoconference.

Mr Chairman,

Mr Co-Chairman,

Ladies and gentlemen,

Let me wish you and all our colleagues a happy new year, and congratulate you all for your hard work in 2020.  You deserve very warm applause.

I would also like to express my appreciation to the OPEC Secretariat staff for continuing to do their utmost to meet all their targets and deliverables, and for supporting these meetings.  I also thank you for working on a Sunday.

It has now been a year since the first human case of COVID-19 was reported in Wuhan, China.  How time flies.

Mr Chairman, I first heard of this virus upon arriving at the airport in Saudi Arabia one year ago today.  The rapid progression of the virus since then has caused agonizing human loss and infected many millions of people across the world, including some of our dear colleagues.

This morning I saw that more than 83 million people have now been affected and 1.8 million have lost their lives to the coronavirus.  I am very moved by the dedication of those who have overcome this terrible virus, and returned to work with a renewed sense of purpose.

Tomorrow, we begin a new chapter in the Declaration of Cooperation (DoC) with the start of monthly OPEC and non-OPEC Ministerial Meetings to evaluate the market.

It was only one year ago that the DoC participating countries began to introduce adjustments of a then-astonishing 1.7 million b/d, with additional voluntary contributions pushing that number to 2.1 million b/d.

How times have changed.

These adjustments, as agreed at the 7th OPEC and non-OPEC Ministerial Meeting in December 2019, were a pre-emptory response to support continued stability in 2020, actions that were welcomed widely as the market rang in a new and promising year.  Looking back at the projections provided by the JTC, I don’t think anyone could have done a better job.

In retrospect, those efforts taken at the end of 2019 pale in comparison to the scope and scale of the actions we have carried out since a series of ground-breaking Ministerial Meetings in April, June, and culminating in the visionary decisions taken at the last meeting one month ago today.

The outcome of the December 3rd Ministerial Meeting paved the way for a gradual return of 2 million b/d to the market over the coming months, while the participating countries stand ready to adjust these levels depending on market conditions and developments.

Collectively over the last nine months, we have delivered an unprecedented response to an unparalleled market shock and continue to lead the industry on the road to recovery.

Mr Chairman,

Mr Co-Chairman,

Ladies and gentlemen,

We are witnessing the very early stages of COVID-19 vaccinations and the progress so far has injected optimism into the economy.  These promising developments, in parallel with the Declaration of Cooperation’s market leadership during the crisis, have contributed to a healthier oil market outlook for 2021.

Following the last Ministerial Meetings, the price of Brent crude inched above $50 per barrel for the first time since early March, while Brent crude and US West Texas Intermediate experienced their longest stretch of advances since June.

After the unprecedented shock experienced last year, the economic forecast calls for brighter days ahead.  Our analysts expect the global economy to grow by 4.4 per cent in 2021 compared to a sharp contraction of around 4.2 per cent last year.  The COVID-19 vaccinations provide upside potential for the economic outlook and may help usher in a strong rebound in the second half of 2021.

Furthermore, we continue to see upward momentum in Asia, especially China, which remains on course for positive growth in 2020 – a singular achievement among the world’s bigger economies.  China’s broad-based recovery forecast stands at about 6.9 per cent for 2021 and provides a beacon of hope for other economies, in the region and beyond.

Our analysts in the Secretariat anticipate that crude oil demand will shift from reverse to forward gear and rise to 95.9 million b/d this year, a gain of 5.9 million b/d from 2020.  The non-OECD will be in the driver’s seat with growth of around 3.3 million b/d.

These projections are a move in the right direction, but there is a wide valley separating this outlook from the Secretariat’s pre-pandemic forecast.  Before the current crisis, at around this time last year, we expected demand reaching 102 million b/d in 2021 6 million b/d more than the current projections.

I am, however, encouraged by the positive momentum in the energy commodity markets, with crude oil prices up by around $7 per barrel or 17 per cent since our last meeting.

Amid the hopeful signs, the outlook for the first half of 2021 is very mixed and there are still many downside risks to juggle.  We are only beginning to emerge from a year of deep investment cuts, huge job losses and the worst crude oil demand destruction on record.

Curbs on social and economic activity remain in place in a number of countries, and there is concern about the emergence of a pernicious new strain of the virus.  Last night I saw on the news there are now about 30 countries that have reported this new strain.

Though the ongoing restrictions are necessary to combat the pandemic, they have chipped away at business sentiment and consumer confidence in some of the world’s biggest economies.  It is too early to tell how quickly key sectors will bounce back to their pre-pandemic growth trajectories even if the vaccines defeat this terrible virus.

Mr Chairman, sectorally, travel, tourism, leisure and hospitality continue to be affected.  Our projections show that there will be rebound in the second half of 2021 with upside potential.  However, it could be another a couple of years before these sectors bounce back to pre-COVID levels, with corresponding lagging impact on oil demand

The Christmas Eve trade agreement between the UK and EU is a promising development for the recovery process after months of very difficult and rancorous negotiations.

Stimulus packages have clearly helped prevent deeper economic contractions and continue to lend crucial recovery support.  The  EU and US have now approved measures which, taken together, provide nearly $2 trillion in additional support for those economies.  It is worth noting that fiscal and monetary stimulus packages in the G20, including bank guarantees, have reached $25 trillion, corresponding to more than 20 per cent of the global economy.

Finally, inventory levels show positive momentum – though they remain stubbornly high.  Preliminary November  data shows total OECD commercial oil stocks fell by around 24.8 million barrels m-o-m.  The current levels are more than 205 million barrels higher than the same time one year ago and about 163 million barrels above the latest five-year average.  Seesawing stock levels dented market momentum heading into the year-end holidays, and outside the OECD, inventories remain well above average levels.

As we turn an eye to this year, we can only speculate on how the social and working habits developed out of necessity last year will ultimately affect important areas such as mobility over the longer term.  Furthermore, the new strain of  the virus is a harsh reminder of how delicate the situation remains after a year of human loss, economic shock, and historic oil market destruction.

The open questions about the future point to the need for the DoC participating countries to stay the course and remain faithful to our commitment to full conformity, and to compensate for earlier overproduction.

Mr Chairman,

Mr Co-Chairman,

Ladies and gentlemen,

I know there have been occasional differences of opinion in fine-tuning the production adjustments, and this is to be expected for such an abnormally difficult and in-depth crisis.  It is a sign of our enduring success that we continue to work in tandem to find common ground to tackle uncommon challenges.

We are most fortunate that the architects of the DoC constructed a framework so solid that it allows us to be agile and flexible, to act in a timely way to support market stability as different conditions arise.  The positive outcomes of the 12th OPEC and non-OPEC Ministerial Meeting are a reflection of the DoC’s visionary and adaptable structure.

We are now into the fifth year of the Declaration of Cooperation and better equipped than ever as we shift from managing a crisis to supporting the recovery.

We continue to benefit from the endurance, patience and commitment gained since the historic decision to create the DoC in response to the severe downturn of 2014 to 2016.

The DoC participating countries have shown without hesitation that we are ready, willing and able to work together to help sustain oil market stability – and this explains why so many global energy stakeholders have been looking to us for guidance.

Looking back, December 2020 was not simply the last month of a horrific year.  It was a month of important milestones for the DoC.  It was the fourth year since the Declaration was signed on December 10th 2016, and the Ministerial Meeting on December 3rd capped a year of historic actions by the participating countries.

Mr Chairman, I would be remiss today if I did not draw on the fountain of wisdom of Jalāl ad-Dīn Muhammad Rūmī:

“The wound is the place where the light enters you.”

Our industry has certainly endured its share of wounds over the past year, and the scars may remain for some time to come.  But through our teamwork and collective endeavours, we have helped provide the light that will see us through to better years ahead

Mr Chairman, I look forward, as always, to a productive meeting today and throughout this new year of 2021.

Thank you.

HE Mohammad Sanusi Barkindo, OPEC Secretary General

HE Mohammad Sanusi Barkindo, OPEC Secretary General