The Organisation of Petroleum Exporting Countries (OPEC) has predicted that despite increasing stability in the demand for crude oil by China and India, there will be a reduction in the demand for the product by about 11 million barrels per day by the end of the year.
Speaking at the virtual 46th meeting of the Joint Technical Committee of the oil cartel, OPEC Secretary-General, Dr. Sanusi Barkindo, stated, however, that the market will likely rebound by six million bpd by 2021, if the expected vaccines for COVID-19 become effective.
Coincidentally, an American company, Moderna, on Monday announced that its vaccine had shown 95% effectiveness against the virus.
During the conference, Barkindo told delegates that the OPEC supply cuts, which started in April, must be strictly adhered to in order to ensure the stability of the prices of crude oil and avoid a reversion to the devastating fall in prices in the first quarter of this year.
He added that the threat of the coronavirus was not over yet as countries have returned to lockdowns to curtail the impact of the pandemic.
He said: “The prospects for oil demand continue to remain weak. We expect demand this year to stay stagnant at about 90 mb/d, which represents a staggering decline of nearly 11 mb/d for the year compared to our January projection.
“For the coming year, demand should bounce back, growing by at least 6 mb/d. However, this latest forecast reflects a downward revision of around 400,000 b/d.
“I would add here that our overall projections are more or less in line with the International Energy Agency, whose latest market report alludes to the role of the DoC and its strong conformity levels in helping to stabilise the global market.”
He said looking again at India and China, oil demand in these countries are expected to bounce back next year and grow by 14 per cent in India and nearly nine per cent in China compared to 2020.
“That translates into combined growth of close to 1.7 mb/d for 2021,” Barkindo stated.
The OPEC boss noted that the pandemic had continued to impact on the global oil market, as the new wave of the disease, has created uncertainties in the market except efforts to find effective vaccines are ramped up.
“Today, there is a sense of déjà vu. As was the case earlier this year, health systems are again struggling to cope with rising patient numbers and policymakers are wrestling to contain the virus without causing further economic disruption.
“Here in Austria, as you might have heard, the government on Saturday announced stringent measures, the second lockdown this year, amid the resurgence of a stronger wave of COVID-19 that is straining the country’s health system,” he said.
He said at the OPEC Secretariat, employees have again been instructed to work from home whenever possible to help ensure their good health and that of their families and colleagues.”
On the economy, Barkindo stated that the OPEC foresees global GDP declining by more than four per cent this year, a stunning setback when compared to its January projection of +3.1 per cent for 2020.
“Our projections reflect a cautious outlook for the coming year, with growth now expected at 4.4 per cent in 2021. The forecast for next year represents a healthy rebound but is nonetheless a downward revision from the 4.5 per cent we presented at last month’s meeting,” the OPEC boss stated.
Describing the times as exceptional, Barkindo cautioned that it was no time to lower the guard, urging members to remain vigilant and ready to respond to shifts in market conditions and to continue to work towards sustainable oil market stability.
“Getting there means sticking to our shared commitment to achieve 100 per cent conformity, which is not only fair and equitable, but vital for the ongoing and timely rebalancing efforts,” he said.
Meanwhile, Nigeria has called on OPEC to reconsider its production quotas under the crude output cut agreement reached by the cartel and its allies, such as Russia.
According to agency report, Nigeria last week submitted its request to OPEC for consideration ahead of full ministerial meetings scheduled for November 30 and December 1.
Nigeria’s request centres on the classification of oil from the country’s Agbami field, which produced around 140,000 b/d over the past four months according to figures from the Department of Petroleum Resources (DPR).
Nigeria’s state-owned NNPC classifies the Agbami grade as a condensate, but considered by the cartel as crude.
Also, Chevron, one of NNPC’s partners at the Agbami field, describes the grade as “a light, sweet crude oil” on its website.
Nigeria said the disagreement over Agbami’s classification inflated some of the secondary source estimates of its crude output and contributed to its poor track record on compliance.
Iraq is the only country to have exceeded its quota by more than Nigeria since the current OPEC+ deal started in May.
An agreement by all secondary sources to classify Agbami as condensate might go some way towards improving Nigeria’s overall compliance. But in the absence of that, Nigeria may be looking for a higher crude output quota.
Nigeria’s October 2018 baseline figure was calculated from secondary source assessments, which included Agbami. This means that a re-evaluation of Nigeria’s quotas might also necessitate a revision to the baseline.
The issue is likely to be discussed at the OPEC+ technical meetings and at the full ministerial meetings when a decision on output policy could be taken for the first half of next year.
Emmanuel Addeh in Abuja and Martin Ifijeh in New Jersey, USA