How Declaration of Cooperation helped OPEC to stabilise oil market in the past — Barkindo
The Secretary General, Organisation of Petroleum Exporting Countries, OPEC, has recounted the effectiveness of the Declaration of Cooperation, DoC, as a strategy in tackling instability in the global market.
In his recent presentation obtained by The Daily, www.thedaily-ng.com, HE Mohammad Sanusi Barkindo, OPEC Secretary General, said: “In this regard, an outstanding example of the multilateral approach can be viewed through the prism of the Declaration of Cooperation (DoC), now in its fifth year, which has brought together 23 oil-producing nations to help return balance to the market and achieve sustainable stability, in the interests of both producers and consumers. It has helped the industry traverse two historic downturns. It has ushered in a new era in global energy cooperation.
“Back at the start of 2017, the focus of the DoC was on returning balance and stability to the oil market in the aftermath of the devastating 2014-16 oil industry downturn.
“The downturn had brought the industry to its knees. Nearly half a million people lost their jobs; an estimated one trillion dollars in investments were either frozen or deferred; a record number of companies filed for bankruptcy, and by July 2016 the OECD commercial stock overhang had soared to a record high of about 403 million barrels (mb) over the five-year industry average.
“Over the subsequent three years, from 2017-2019, the diligent and coordinated response through voluntary production adjustment decisions taken by the DoC helped rebalance the market, restore stability and revive the industry.”
According to him, “When the year turned from 2019 to 2020, there was a great deal of optimism for the oil market in the coming 12 months. Not only for the oil market; the global economy too.
“By March, however, the COVID-19 pandemic had pervaded almost every aspect of our daily lives, with widespread lockdowns, economies in major distress, and many businesses shuttered in. In terms of the oil and gas industry, every producer was impacted. No-one was immune.
“The DoC had to again stand up and be counted. Action was needed, and activities we did with the largest and longest production adjustments in the history of the OPEC, the DoC, and the oil industry agreed on 12 April 2020 to help counter the massive oil demand decline that at times was above 20 mb/d in April.
“The phased reductions in the adjustment levels over a two-year period demonstrated the full commitment of all participants to a common goal. I am sure each and every one of us can recall the dire situation the industry was in, which was most dramatically illustrated on 20 April 2020 when the price of WTI went negative. It was a visceral day, and one often described as ‘Black Monday’.”
He added: “It was a time when the industry faced a potential crude oversupply of nearly 1.3 billion barrels. There were even deep concerns that some storage hubs could actually reach tank tops. Thankfully, this never came to pass, in part due to the decisive actions of the DoC. Since then the DoC has shown great courage and flexibility
