OPEC Secretary-General Mohammad Barkindo said Thursday the novel coronavirus (Covid-19) pandemic has had devastating impacts on all economic sectors, including the energy market.
In introductory remarks via webinar to the ninth (extraordinary) OPEC and non-OPEC Ministerial Meeting, he said, “Covid-19 has pervaded almost every aspect of life.
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“We see it in the lockdowns initiated by governments across the world; the widespread travel restrictions; business and industry shutdowns; school closures; and social distancing measures.
“For the oil market, it has completely up-ended market supply and demand fundamentals since we last met on March 6,” he affirmed.
“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 2Q-20, are beyond anything we have seen before,” Barkindo stressed.
“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 percent.
“Today, it is a negative 1.1 percent. It is incredible to think that the global contraction is far greater than that for the Great Recession of 2008-09,” he pointed out.
“In early March, expected 2020 global oil demand growth was just below 0.1 (million barrels per day) 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.
“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,” he went on.
“The OPEC Reference Basket has fallen from USD 52.7 pb in March 2020 to below USD 20 pb in early April, a decline of around 70 percent.
“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 2Q-20.
“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,” Barkindo explained.
“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 2014-16.
“It was when oil producers lost trillions of dollars in foregone revenues, and globally more than USD one trillion was lost in terms of investment,” he regretted.
“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,” he said, noting that these difficult times require unparalleled flexibility and commitment.
“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 percent of global oil consumption has evaporated and this huge market imbalance needs to be urgently addressed,” he added.
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