Back in March and April, the world faced its largest oil demand shock in living memory. On days in April, demand was 23 million barrels a day (mb/d) below that of 2019, the WTI May futures price contract went negative on April 20 and the global economy seemed to be teetering on abyss. Every producer was impacted, no one was immune.
The Organization of the Petroleum Exporting Countries (OPEC), and non-OPEC producers in the Declaration of Cooperation (DoC), acted decisively and swiftly to help cushion the tremors and help bring a semblance of stability to the market, with the largest and longest voluntary production adjustments in the history of the oil industry, which were supported far and wide, included positive comments from the White House.
The decision taken benefited all producers, including the major international oil companies, and those independent operators in the Permian, Bakken and Eagle Ford. It has also received support from major consumers, such as India, and its platform for recovery and future growth is beneficial to securing the investments required to meet the future needs of consumers.
We are seeing some green shoots of recovery in the oil market on the back of voluntary production adjustments, the reopening of economies, and increased travel. However, with the global economy still on an unsure footing, and the oil market not expected to see oil demand return to 2019 levels before 2022, the DoC stands record to take any necessary actions to help ensure a balanced and stable oil market.
The foundations for the firm actions of OPEC and the DoC in 2020 can be traced back 60 years ago, when OPEC was founded in Baghdad on the 14 September 1960.
Six decades alone is a monumental achievement for a developing country organization, and one representing an especially volatile commodity – oil. Since the early 1970s we have witnessed seven major market cycles, including the latest in 2020, each of which has entangled with severe and sudden imbalances threaten the oil market and global economic development.
Throughout the Organization’s history there have been one recurring theme that has transcended across the decades and guided the Organization’s work to support sustainable oil market stability: cooperation.
The DoC has been a platform that has built on OPEC’s previous cooperative efforts and has also instilled a complementary framework for the future through the endorsement in 2019 of the Charter of Cooperation (CoC). The forward looking trajectory that underpins the CoC means that it is an important platform for participating countries, not only in helping maintain a sustainable oil market stability, but also in evolving a future for oil and all energies in the energy transition.
OPEC calls on all stakeholders to work together, find lasting solutions and take appropriate actions to help sustain balance and stability in the oil market, ensure future energy demand is met, and meet the challenge of climate change.
The energy challenges of our planet requires comprehensive and flexible approaches – no single energy source is a panacea – and we should look to further advance cleaner and more efficient technologies across all available energies. We need to appreciate the nuances in the debate, and balance the needs of people in relation to their social welfare, specifically energy poverty, the economy and the environment.
In looking ahead, OPEC reaffirms its faith in the value of broader and deeper dialogue and cooperation. We are open to engage with all stakeholders. We need to talk to each other and not at each other. We need to strive together to ensure sustainable growth, development and prosperity not only for our generation, but for our children and for our children’s children.