OPEC predicted that demand for oil could reach pre-Covid-19 levels by the year-end

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OPEC headquarters in Vienna, Austria. (Credit: DALIBRI/Wikipedia.org)

The Organisation of the Petroleum Exporting Countries (Opec) and its allies, collectively called OPEC+, urged oil-producing countries that are drawing above output targets to reduce more volumes in August-September due to concerns of slow oil demand recovery.

The association also predicted that demand for oil could reach pre-Covid-19 levels by the year-end.

The 21st Meeting of the Joint Ministerial Monitoring Committee (JMMC), which was held through a virtual conference, reviewed the monthly report prepared by OPEC’s joint technical committee (JTC). Besides, the developments in the global oil market were reviewed since the committee’s last meeting in mid-July.

The meeting was held under the chairmanship of Saudi Arabian Minister of Energy Prince Abdul Aziz Bin Salman, and co-chair Alexander Novak, who is the Russian Minister of Energy.

Data for crude oil production during July 2020 was reviewed as well by the committee. It was noted by the committee that the participating OPEC and non-OPEC countries of the Declaration of Cooperation (DoC), delivered a significant performance in overall conformity, at 97%. These included Mexico as well as per the secondary sources.

As per Opec, the JMMC members reiterated their commitment to the DoC to meet full and timely conformity. Apart from that, the underperforming members of the committee agreed to make up for the shortfalls in May, June, and July 2020 by the end of next month.

The JMMC members also appealed to other underperforming participating nations to present their plans for implementing the compensation required for the overproduced volumes to the OPEC Secretariat by 28 August 2020.

OPEC statement on the JMMC meeting

OPEC stated: “The Committee emphasized that achieving 100% conformity from all participating countries in the DoC and compensating for the shortfalls in May, June and July 2020 is not only fair, but vital for the ongoing rebalancing efforts and to help deliver long-term oil market stability.

“It instructed the JTC and the OPEC Secretariat to closely monitor and report to the JMMC on the implementation of the required compensation by the underperforming participating countries as stipulated in their plans.”

The JMMC committee also noted that there are some indications of market conditions gradually improving, which includes the reversal of the inventory build in July 2020 along with the narrowing of the gap between global demand and supply of oil.

However, the committee felt that the speed of recovery seemed to be slower than expected with increasing risks of a prolonged wave of Covid-19.