OPEC commercial oil inventories are expected to stand slightly above the five-year average through Q1 2021, before dropping below that benchmark for the remainder of the year, OPEC Secretary General Mohammed Barkindo said Sept. 27.
The projections are based on latest forecasts, which expect world oil demand in 2020 to contract by 9.5 million b/d, while non-OPEC liquids production is anticipated to decline by 2.7 million b/d, said Barkindo said in prepared remarks at the G20 energy ministerial hosted online by Saudi Arabia.
“Therefore, our job is not yet complete. We must reach across whatever divide we face and work towards broader and consensus-driven solutions that are beneficial to our stakeholders and ultimately the entire world,” Barkindo said.
OPEC and its allies, including Russia, have said they are aiming to reduce global oil inventories to the five-year average through their collective production cuts.
The so-called OPEC+ alliance agreed to cut 9.7 million b/d of production starting in May, which was then relaxed to a 7.7 million b/d cut from August through the end of the year, anticipating a pick-up in global oil demand. From January 2021 through April 2022, the cuts are scheduled to taper further to 5.8 million b/d, but OPEC+ leaders have not ruled out maintaining deeper cuts if market conditions warrant.
In its latest monthly oil market report on Sept. 14, OPEC projected that 2020 oil demand would come in 400,000 b/d lower than it had predicted in August, while 2021 was revised down by about 770,000 b/d.
Barkindo branded this past April as ‘Black April’, referring to when global oil demand plummeted by 23 million b/d due to the Covid-19 pandemic.
“There was a real risk that oversupply would have added 1.3 billion barrels to global oil stocks, nearly exhausting the available worldwide storage capacity,” Barkindo said.
In the most recent Joint Ministerial Monitoring Committee meeting on Sept. 17, Saudi energy minister Prince Abdulaziz bin Salman delivered a warning to his OPEC+ counterparts against non-compliance of their production quotas.
While collective compliance was 101% in August, not all members shared the burden equally, and any countries that overproduced their quotas must make extra “compensation cuts” of an equivalent volume in subsequent months.
The next meeting of the JMMC, which is tasked with adjudicating compliance and assessing market conditions, is Oct. 19.