The league of world’s key petroleum producers hosted in the Organization of Petroleum Exporting Countries (OPEC) and its non-member allies are still positioned to apply supply modulation mechanisms in protecting vulnerable economies from oil market shocks as the resilient coronavirus pandemic threatens another lockdown.
Secretary General, Dr Mohammed Barkindo, declared in a presentation to the Nigerian Association of Energy Economists (NAEE) that OPEC the 24 oil producing nations bonded in the 2016 Declaration of Cooperation (DoC) have solidified commitments to market interventions that protect the petroleum industry and oil dependent economies.
“We are well equipped to manage all crisis using the tools we have maintained: trust, confidence and cooperation, as aptly stated by Alexander Novak, our dear colleague and Deputy Prime Minister of the Russian Federation and CoChair of the OPEC and non-OPEC Ministerial Meeting,” Dr Barkindo told conference delegates.
He said the timely, bold and decisive actions by the DoC nations saved the oil industry from total collapse during the most extreme cycle to date, resulting in higher revenues for producing countries, despite production adjustments.
“The resulting stability was appreciated by all stakeholders in the industry,” he added.
The Oracle Today reports that during the price collapse of 2020, most oil dependent economies including Nigeria sank straight into recession; while the global petroleum industry and financial systems fell vulnerable to collapse as bankruptcies swept across the industry and exposed lenders to massive losses.
And following the existential threat, OPEC quickly rallied key oil producing countries in 2020 to wipe nearly 10 million barrels of oil per day from the global petroleum markets to protect the industry and economies from demand destruction wreaked by COVID-19.
With the development and massive deployment of vaccines and other medical remedies against COVID-19, ease of restriction across the globe, and uptick in global economic recovery; OPEC+ has started cautiously restoring withdrawn barrels to the market with target to accelerate global economic recovery and enhance returns for investors and resource owners.
“The worst seems to be behind us and economies around the world are on a path to recovery, but the repercussions of COVID-19 will not disappear quickly and the oil industry will continue to face medium to long-term consequences,” Dr Barkindo pointed out to economists.
He explained that although demand growth seems to be strong this year at 6.0 million barrels per day (mb/d) and the industry is expected to continue to recover in 2022, 2019 demand levels would be unlikely reached before the end of 2022.
He pointed out that recovery of the transport sector would take longer to return to return to pre-COVID levels.
“Road transport is expected to recover by sometime in 2023 and aviation in 2024. These figures assume that the pandemic will be contained within this year,” he said.
He pointing at the high stakes and vulnerability of the oil dependent economies to impacts of COVID-19, Dr Barkindo stated that “we are all lucky that the Declaration of Cooperation was in place before the pandemic struck, allowing its members to quickly ramp up a coordinated approach and contain the extreme damage that followed.”
He warned economies that despite administration of over 3.44 billion vaccine doses worldwide and achievement of 25.3 percent of single dose coverage, “the rate of vaccination in developing countries is still lagging behind.”
“The COVID-19 pandemic rages on in many parts of the world, and numbers are again on the rise in some areas due to highly contagious variants. The pandemic could lead to further lockdowns and travel restrictions,” he stressed.
He assured that OPEC and its allies in the DoC are prepared and ready to intervene in the event of demand drain by possible lockdowns, adding that that already developed tools and strategies for intervention are still in place.