OPEC+ must stick to production cut deal, says Barkindo

The Organisation of Petroleum Exporting Countries and its allies must remain committed to their production cuts pact, despite signs that oil demand is starting to recover from the slump triggered by the coronavirus pandemic, the Secretary-General, OPEC, Mohammed Barkindo, has said.

“There are tentative signs of a recovery, we do believe that the worst is behind us,” Barkindo was quoted by Energy Intelligence as saying in an interview.

“Nevertheless, we also realise that we cannot lose our laser focus on helping bring supply and demand back into balance and providing a more stable market in the coming months. … This is not the time to stand back and admire what has been achieved over the past weeks. We will not take our foot off the gas,” he added.

Barkindo said the OPEC Secretariat was closely monitoring the gradual pickup in demand, pointing out that the recovery in China’s refinery utilisation rates had been particularly striking.

“Indeed, some of the demand contraction in 2020 may also be mitigated sooner, if the extraordinary government stimulus packages around the world accelerate a faster economic rebound,” he said.

Barkindo said he was confident that OPEC nations and their non-OPEC allies, called OPEC+, would comply with their April agreement, which called for combined production cuts of 9.7 million barrels per day in May and June, with cuts continuing at lower levels through April 2022.

Members of the group are talking to each other on an almost daily basis as they implement and monitor the cuts, he said.

“There is also widespread recognition that there is no short-term fix. The OPEC+ agreement’s scale and scope underscores the fact that this is also a platform for recovery and future growth,” he added.

Early signs show that members of the alliance have indeed been reining in their output and getting close to their targeted levels, including some countries that have failed to comply with past agreements.

Low oil prices have also caused output to fall in the US and other countries that do not belong to the alliance.

Saudi Arabia recently announced an additional voluntary cut of 1 million bpd for the month of June, with the United Arab Emirates, Kuwait and Oman also agreeing to chip in with modest additional voluntary cuts.

Barkindo applauded the move and said it “underscores the leading role that these countries are playing in helping expedite the rebalancing process.”

He declined to comment on what might happen at the next meeting of senior OPEC+ officials, which is scheduled for June 10.

He also highlighted the potentially harmful effects on oil supply and prices if the current industry slump leads to an extended period of reduced upstream investment. “Investments are the lifeblood of the oil industry. A lack of investments today and in the near future could have major implications for both producers and consumers in the medium and longer term,” Barkindo said.