(OPEC, 9.Apr.2020) — Delivered by HE Mohammad Sanusi Barkindo, OPEC Secretary General, at the 9th (Extraordinary) OPEC and non-OPEC Ministerial Meeting, 9 April 2020, via webinar.
Over the course of the last few months, COVID-19 has pervaded almost every aspect of life. We see it in the lockdowns initiated by governments across the world; the widespread travel restrictions; business and industry shutdowns; school closures; social distancing measures … I could go on.
Covid-19 is an unseen beast that seems to be impacting everything in its path. First and foremost this comes in the tragic loss of life; our thoughts and prayers go out to all those affected.
There are also no sectors of the economy unaffected by this unprecedented situation.
For the oil market, it has completely up-ended market supply and demand fundamentals since we last met on 6 March.
Even in the first week of March the outlook looked relatively bleak, but in just over one month it has changed beyond all recognition. The supply and demand fundamentals are horrifying; the expected excess supply volumes on the market, particularly in the 2Q20, are beyond anything we have seen before.
Our industry is hemorrhaging; no-one has been able to stem the bleeding. We are already seeing some productions shut-ins, companies filing for bankruptcy and tens of thousands of jobs are being lost.
The data and analysis presented and deliberated on today, underscores the scale of the massive challenge before us.
Only one month ago at the meetings in Vienna, expected 2020 global GDP growth was 2.4%. Today, it is a negative 1.1%. It is incredible to think that the global contraction is far greater than that for the Great Recession of 2008-2009.
In early March, expected 2020 global oil demand growth was just below 0.1 mb/d. Today, we are looking at a contraction of 6.8 mb/d, with the second quarter alone close to 12 mb/d and expanding. These are staggering numbers! Unprecedented in modern times.
The outlook for non-OPEC supply growth in 2020 has also fallen by over 1.5 mb/d, although this is nowhere near the drop for oil demand.
The OPEC Reference Basket has fallen from $52.7/b in March 2020 to below $20/b in early April, a decline of around 70%. We are all now seeing significant less revenue coming into our treasuries.
This evidently has major consequences, with the limits of the market being tested on many fronts.
We are likely to see further breaches in logistical capacity, for ships, pipelines, terminals and processing units. And it is clear that available storage capacity is quickly filling up.
To put this in some context, the OPEC Secretariat’s assessment of available global oil storage capacity stands over one billion barrels. Given the current unprecedented supply and demand imbalance there could be a colossal excess volume of 14.7 mb/d in the 2Q20. This oversupply would add a further 1.3 billion barrels to global crude oil stocks, and hence exhaust the available global crude oil storage capacity within the month of May.
There is a grizzly shadow hanging over all of us. We do not want this shadow to envelope us. It will have a crushing and long-term impact on the entire industry.
It is not just oil – the situation is negatively impacting all commodities; metals; minerals; stocks and financial markets.
All the producers here, OPEC, OPEC+ and other producing nations that have taken it upon them to responsibly join the meeting today, need to recall the severe market imbalance 2014-2016. It was when oil producers lost trillions of dollars in foregone revenues, and globally more than $1 trillion was lost in terms of investment.
It is imperative we take urgent action. It is in all of our interests, and it is also in the interests of consumers. That is not to say that any medicine will be easy; obviously, it won’t. But it is clear that it is needed. And it will benefit us all.
These difficult times require unparalleled flexibility and commitment.
Commitment and shared responsibility is part and parcel of the history of the DoC partners. We have always been proactive and proportional; responsible and responsive; thorough and thoughtful.
I call on oil producers here today, to look at the market outlook we present, and stand shoulder-to-shoulder to help this vital global industry survive. For the current quarter, around 15% of global oil consumption has evaporated and this huge market imbalance needs to be urgently addressed.
I would like to leave you with a line from the great Bard, William Shakespeare:
“Let me embrace thee, sour adversity, for wise men say it is the wisest course.”
With the huge challenge before us, and in this increasingly complex and interdependent world, we count on the spirit of togetherness and the enduring timelessness of the principles of international cooperation driven by inclusiveness and mutual respect among all nations gathered today to guide us through these demanding period.
HE Mohammad Sanusi Barkindo, OPEC Secretary General