OPEC ‘cautiously optimistic’ on demand recovery, doesn’t see repeat of Q2: Barkindo

OPEC is “cautiously optimistic” about oil demand recovery and does not expect the contraction in the second quarter to be repeated, Secretary General Mohammed Barkindo said Oct. 26, speaking at the India Energy Forum by CERAWeek.

“The developments for vaccines are continuing around the world, with candidates that have very good prospects of coming to the market as soon as possible,” Barkindo told the India Energy Forum.

“Therefore we do not expect a relapse to the massive contraction that we saw in the second quarter. We remain cautiously optimistic that the recovery will continue. It may take longer, maybe at low levels, but we are determined to stay the course.”

He reiterated that both economic growth and demand recovery remain “anemic” due to the spread of the virus.

OPEC+ output cuts
The 23-country OPEC+ alliance is in the midst of a 7.7 million b/d production cut accord, which is scheduled to shrink to 5.8 million b/d from January 2021 through April 2022, in expectation of improving demand as the world recovers from the coronavirus pandemic.

But with oil prices hovering in the low $40s/b in recent weeks and Libya, which is exempt from the cuts, rapidly restoring production after a ceasefire between warring factions, the market has been discussing whether OPEC+ will extend its current quotas, or even tighten them.

Any changes would need to be approved unanimously by the entire bloc, whose next online meeting will take place Nov. 30-Dec. 1.

OPEC will continue to “adapt to the changing realities,” Barkindo told the India Energy Forum.

“We are determined to assist the market to restore stability by ensuring the stock drawdowns continue in order to restore the supply and demand balance,” he said.

Demand recovery
OPEC expects global oil demand recovery of 6 million-7 million b/d in 2021, on the back of a GDP rebound of 4.7%, Barkindo told the Energy Intelligence Forum Oct. 15.

The organization’s analysts have pegged 2020 oil demand at 90.29 million b/d, rising to 96.84 million b/d in 2021, according to its latest monthly oil market report.

OPEC+ is seeing “a continuous high level of conformity or compliance,” averaging 100%, Barkindo told the India Energy Forum.

OPEC+ compliance with its quotas stood at 102% in September, up from 101% in August, the alliance’s technical committee found.

Barkindo also highlighted the importance of the compensation cuts being implemented by 13 OPEC+ producers that previously did not adhere to their quota levels.

Under the deal, members that pumped in excess of their quotas must compensate with extra cuts of equivalent volume by the end of the year. With the compensation cuts included, OPEC+ compliance drops to 97% for September, according to OPEC+ data seen by S&P Global Platts.
Source: Platts