The Organisation of Petroleum Exporting Countries (OPEC) says despite a positive outlook of the international oil market in 2018, fresh challenges lurk by the corner as member countries look forward to 2019.
The President of the OPEC Conference, and United Arab Emirate (UAE) Minister of Energy and Industry, Suhail Al-Mazrouei, noted this in his address at the opening session of the 175th meeting of the group in Vienna, Austria on Thursday. The meeting is the last for the year.
He described 2018 as a positive year, particularly in the area of clearing output inventories over-hang and stabilising the market through its internal rebalancing mechanism.
“We witnessed positive progress (in 2018) on removing the inventory overhang, further rebalancing the market and achieving excellent collaboration between OPEC and non-OPEC participants in the ‘Declaration of Cooperation,” he noted.
On November 30, 2016, the joint Ministerial Monitoring Committee (JMMC) was constituted to develop strategies to accelerate the stabilisation of the global oil market through voluntary adjustments in total production of around 1.8 million barrels per day.
Under the arrangement, OPEC declared to cooperate with non-OPEC oil-producing countries to ensure the realisation of the objective to stabilise prices.
Some of the major beneficiaries of the cooperation included Nigeria, Iran and Libya, granted exemptions from the decision by the group to cut members’ oil output by about 740,000 barrels per day.
The initial production cut agreement came into effect January 1, 2017 for six months, before an extension of the exemption by nine months from July 1, 2017.
The output cut resolution helped stabilise the oil market, with OPEC Secretariat data showing commercial oil stocks in the Organisation of Economic Cooperation and Development (OECD) dropped below an average of 168 million barrels at the beginning of 2018.
The OPEC president said the cooperation between OPEC and non-OPEC members over the past two years resulted in a balanced, stable and sustainable global oil market.
“This serves the interests of consumers, producers, the industry and the global economy at large,” he said.
However, he said the outlook for 2019 reveals a new set of challenges, including the general consensus pointing at higher supply growth than expected global requirements as well as signs of a potential slowdown in demand.
He urged the meeting thoroughly examine the potential gap between supply and demand in the new year, as well as how this might impact inventory levels, against the background of market balance achieved over the past two years.
“We need to focus our joint efforts on maintaining the balanced market achieved in 2018; sustaining the stability we all desire; and, ensuring there is a firm foundation to allow the industry to make the necessary investments to continue to meet expected future oil demand,” the OPEC President said.
This, he said, will require member countries adopting a change in strategy from 2018, which would require more cooperation and partnership, particularly towards a more permanent relationship with non-OPEC producers.
The OPEC President used the event to announce the receipt of a letter from Qatar notifying the group of its intention to withdraw its membership of OPEC with effect from January 1, 2019.
Qatar accounts for about 25.24 billion barrels reserve (about 2.1 per cent) of the over 1.2 trillion barrels (about 81 per cent) of total OPEC proven reserves. The world’s total proven oil reserves currently stand at about 1.5 trillion barrels, according to OPEC data.
Although analysts argue Qatar’s exit could potentially be of benefit to Nigeria and OPEC, Minister of State for Petroleum Resources, Ibe Kachikwu, and Nigeria’s representative to OPEC, Mele Kyari, think otherwise.
“The exit of Qatar from OPEC will have no effect,” Mr Kachikwu said in response to PREMIUM TIMES’ inquiry.
“Every country will still produce her oil (volume) whether within or outside OPEC. Oil production decisions are influenced by total world supply, not just OPEC’s.”
He said at the moment, OPEC needs to cut its production capacity as the world is currently oversupplied.
For Mr Kyari, who is also the General Manager, Crude Oil Marketing Division of the Nigerian National Petroleum Corporation (NNPC), Qatar’s exit will not have any material impact on OPEC.
However, he noted that the exit of a country that has remained a member of OPEC for over 57 years is certainly profound.
“The quota regime has not been operating for a long time. So, Qatar’s exit from OPEC would not impact Nigeria’s production in any way. The ongoing meeting may decide for a general production cut that may include Nigeria,” he said.