OPEC + demands 100 percent work
At a meeting taking place this Wednesday, the energy ministers, members of the OPEC+ countries Monitoring Committee, noted the substantial implementation rates of the deal aimed at the oil output cuts, but drew attention to those parties to the agreement who are lagging behind in its implementation.
“During the meeting, everyone agreed that the implementation rates of the deal achieved in July were very high and amounted to 97% for all the OPEC and non-OPEC countries taken together. Of the 9.7 million barrels to be cut in July, 9.4 million were actually reduced. This is a fairly large, even unprecedented, level of reduction,” said Alexander Novak, head of the Ministry for Energy of the Russian Federation, following the meeting.
“We looked at the situation existing not only in the OPEC+ countries, but also in the G20 countries that had joined the agreement. So the total reduction in countries not embraced by OPEC+ has reached about 3 to 3.5 million barrels per day; in the United States it is about 2 million barrels per day. This is also a significant contribution to balancing the market,” the Russian minister added.
Thus, the total volume of oil production reduction in July amounted to 12.4-12.9 million barrels per day.
Such a high level of production cutback has allowed oil-producing countries to be optimistic about the future of the oil market, as the prices in July stably exceeded $ 40 per barrel, and gradual reduction of the world stocks began. The demand for oil and oil products, including jet fuel, started to recover, springing back close to its pre-crisis level.
“We look ahead to the future of the market with optimism. We can see that the volatility has decreased both in the price factor and in the overall market supply. To date, stocks have shown a decline from the five-year average for the first time. We have entered the stage of stocks attrition. This is the trend we wanted to achieve ... Air transportation and people’s mobility are being restored. The consumption of jet fuel has grown, and the consumption of gasoline and diesel fuel has recovered to about 85% of what it was before the crisis. As of today, the recovery in oil demand has reached 90% of the level existing before the crisis,” Novak noted.
However, despite the successes achieved, the OPEC+ Monitoring Committee urged the participants to adopt a responsible approach towards the implementation of the deal, especially the countries that have so far failed to achieve the declared cut-down levels. According to the Russian minister, the “flunker” countries have presented schedules of how they will catch up with the transaction settlement. As a result, in August and September they will have to not only ensure 100% fulfillment of the agreement, but also to intensify the reductions in order to compensate for the volumes produced in excess of the deal.
“We can see how tough the recovery is; a lot of uncertainties prevent us from returning to the pre-crisis level. The market is still very fragile, with many uncertainties and, possibly, even “black swans”. At the meeting of the Monitoring Committee, we noted that we had no time to relax, because we had obligations to fulfill. The countries that have not yet fulfilled their deal have come up with their catch-up schedules,”Novak noted.
The results of the error-checking by the transaction “flunkers” will be considered at the next meeting of the Monitoring Committee due to be held in a month.
“The pandemic is still here to stay, and we need to work together to combat its spread and to protect the health of our population,” he added at a meeting of the Monitoring Committee.
The day before the meeting it became known that A. Novak had tested positive for coronavirus. Therefore, at the beginning of the meeting, all the participants of the Monitoring Committee, many of whom have been meeting each other at OPEC+ assemblies for several years in a row, stood up and supported the Russian minister with applause.
“I would like to express my gratitude for your support and for your kind words addressed to me. This is very important for me now. We are undergoing treatment for this disease, it’s quite unpleasant. Nevertheless, everything is fine,” Novak thanked them in response.