The Organisation of Petroleum Exporting Countries (OPEC) expects a strong rebound in the global oil market in the second quarter of this year, amid the growing ravaging impact of the COVID-19 pandemic.
The OPEC Secretary-General, Mohammad Barkindo, stated this in his remarks at the opening of the 47th Meeting of the Joint Technical Committee (JTC) held via videoconference on Sunday.
OPEC Secretariat analysts say they anticipate crude oil demand slump in 2020 to reverse this year and rise to about 95.9 million barrels per day, by gaining about 5.9 million barrels per day, with non-OECD allies expected to account for about 3.3 million barrels per day output.
Amid an encouraging positive momentum in the energy commodity markets, with crude oil prices up by about $7 per barrel, or 17 percent since the last Ministerial meeting, Mr Barkindo said the outlook for the first half of 2021 remains mixed, with many downside risks to contend with.
“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,” the OPEC chief said.
“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,” he added.
Scourge of COVID-19
The rapid spread of the COVID-19 virus, he said, has caused agonizing human losses and infections among many millions of people across the world, with more than 83 million people affected so far, and 1.8 million lives lost to the virus.
The meeting was held ahead of Monday’s opening of the 25th monthly meeting of the Joint Ministerial Monitoring Committee (JMMC) and the 13th OPEC and non-OPEC Ministerial Meeting to evaluate the market and the Declaration of Cooperation (DoC) with members and their allies.
Both committees were created under the umbrella of the DoC signed at the First OPEC and non-OPEC Ministerial Meeting on December 10, 2016 in Vienna, Austria. The JTC is the JMMC’s technical think-tank.
The mandates of the JMMC and JTC include reviewing the conditions and developments of the global oil market, as well as monitoring the conformity levels to the voluntary production adjustments adopted by OPEC’s 13 Member Countries and ten key non-OPEC oil-producing countries.
The DoC participating countries began last year to introduce adjustments of about 1.7 million barrels per day output, with additional voluntary contributions raising the volume to about 2.1 million barrels per day.
The adjustments were agreed at the 7th OPEC and non-OPEC Ministerial Meeting in December 2019, as a response to support the continued market stability in 2020.
Mr Barkindo who said a review of the market projections by the JTC has revealed tremendous progress towards set targets, commended the OPEC Secretariat for continuing to meet its targets and deliverables.
At its meeting last December 3, Mr Barkindo said the Ministerial committee resolved to pave the way for a gradual return of 2 million barrels per day to the market over the coming months.
He said member-countries have indicated their readiness to comply with the resolution to adjust these levels depending on market conditions and developments.
Interventions and response
These interventions over the last nine months, he said, have delivered an unprecedented response to an unparalleled market shock and set the industry on the path to recovery.
He noted the commencement of COVID-19 vaccinations, saying the progress so far has raised optimism in the economy.
These promising developments, side by side with the DoC’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.
OPEC Secretariat analysts say they expect the global economy to grow by 4.4 percent in 2021, compared to a sharp contraction of around 4.2 per cent last year.
With the commencement of the COVID-19 vaccinations, the OPEC Chief said the potential for the economic outlook may help usher in a strong rebound in the second half of 2021.
Although Mr Barkindo acknowledged these projections as moves in the right direction, he said there remained a wide gulf between the outlook and the Secretariat’s pre-pandemic forecast.
Prior to the COVIC-19-induced crisis in the corresponding period last year, he said the OPEC projections were that demand would reach 102 million barrels per day in 2021, about 6 million barrels per day more than the current figures.
Despite the continued impact of COVID-19 on the global economy, particularly on travel, tourism, leisure and hospitality industries, he said OPEC projections show prospects for a rebound in the second half of 2021 with upside potential.
He however said it could take another couple of years before these sectors bounce back to pre-COVID levels, with a corresponding lagging impact on oil demand.
Following an enormous challenge posed by growing instability in the oil market, OPEC+, made up of members of OPEC and their allies in the non-OPEC, was forced to cut production by a record 10million in 2020 in the wake of the global lockdown as a result of the breakout of COVID-19.
Apart from its initial cut output by 9.7 million barrels per day between May and June, 2020, the group followed up with another cut to 7.7 million between July and December 2020, with the ultimate cut expect to take the output to 7.2 million between January 2021 and April 2022.