OPEC production freeze halts prices volatility

The consensus decision among the Organisation of the Petroleum Exporting Countries (OPEC), has been effective in arresting any further deterioration in prices and it has helped reduce volatility, OPEC Secretary General, Mohammad Sanusi Barkindo, has said.

Speaking on Monday, at the 5th High-level Meeting of the OPEC-Russia Energy Dialogue, Vienna, Austria, Barkindo said that the decision to cut production has also improved overall market sentiment and strengthened the case for burden sharing and broader cooperation.

“We believe it is essential that producers, both OPEC and non-OPEC, look to address the issue of the stock high inventories.  This is now central to the return of a balanced market and to establish sustainability.

The importance of this cannot be overemphasized”, he added.

He said that there is need for sustainable market stability to fund investment in new exploration and production, to arrest decline rates in existing fields, expand midstream and downstream capacity.

Barkindo added that market stability will make it easy for operators to hire, train and support the people that will continue to drive oil industry forward in the years ahead.

He disclosed that there are also many other ongoing and related challenges for oil markets, such as: the uncertain prospects for the global economy; excessive speculation and the role of financial markets; the impact of geopolitics; advances in technology and the benefits that could spill-over into other areas of the energy value chain; environmental and climate change policies; and sustainable development concerns.

A number of these issues, he noted, “are on our agenda today, with specific presentations on the uncertainties associated with climate policies, and technological developments and their possible implications for oil and energy markets.”

Barkindo said that there are signs that the rebalancing of the fundamentals is underway, with overall non-OPEC supply contracting this year and demand at healthy levels, the large stock overhang continues to be a major concern.

He stated: “It is evident that the short-term picture is the one on all of our minds.  But we need to appreciate the fact that all timeframes are interlinked.

“What happens today will have a bearing on what happens in the future, particularly given that this industry is very much a medium- to long-term business.

In this regard, the OPEC-Russia Energy Dialogue has become an established platform, among others, to discuss the variety of challenges that we face, as well as the opportunities that our industry continues to offer.

“Over the years, our bilateral cooperation has flourished, and we value the direct and open channels of communication that have evolved.  The leadership role of the Russian Federation is crucial in combatting the current energy challenges that are often intertwined and complex in nature.”