The Organisation of Petroleum Exporting Countries (OPEC) has reassured that it will spearhead the joint efforts in re-establishing healthy oil market fundamentals and restoring balance to the oil market in support of the global economy stability.
The OPEC Secretary-General, Mr Mohammed Barkindo, gave the assurance in a statement to the International Monetary and Financial Committee (IMFC) Meeting of Ministers and Governors, at the ongoing World Bank/IMF virtual meeting.
“OPEC would like to take this opportunity to reaffirm its long-standing commitment to supporting oil market stability for the mutual benefit of consuming and producing nations; thus, contributing significantly to the health of the global economy.
“The historic success of the Declaration of Cooperation has underscored the Organisation’s leadership in ensuring a stable and constructive environment in which future energy requirements can be met.
“Given the current global crisis brought on by the COVID-19 pandemic, the need for international coordination has become ever more apparent.
“OPEC reiterates its commitment to spearhead the joint efforts in re-establishing healthy oil market fundamentals and restoring balance to the oil market in support of the global economy,’’ he said.
He also said that the global oil market showed relative stability and ended 2019 on a positive note, in spite of economic headwinds and high uncertainties regarding ongoing trade disputes, Brexit and geopolitical developments throughout the year.
According to him, at the beginning of 2020, there were signals that the economy would rebound from the slowdown in the second half of the previous year, with global economic activity, including global trade and industrial production.
“Despite strong growth in non-OPEC production, the global oil market remained well balanced, owing to the strong conformity of OPEC and participating non-OPEC producing countries in the Declaration of Cooperation which played a major role in improving oil market conditions and market stability.
“However, instead of the expected pick-up in activity in 2020, the global economy and, consequently, the global oil market are experiencing one of the most severe crises in recent history, caused by the COVID-19 pandemic.
“Countries around the world have virtually shut down, imposing travel restrictions and mandating social distancing measures in an effort to contain the pandemic.
“These measures have not only severely affected global economic growth, they have also caused a historic demand shock in the oil market, which has led to extreme volatility in oil prices,’’ he added.
Barkindo said that concerns about the grave oil market imbalance, which could lead to a large build in global oil stocks in coming months, led to oil prices dropping significantly in late March to reach the lowest levels in nearly 18 years.
He said that oil prices lost about two-thirds of their value over the first quarter of 2020.
Barkindo also said that given the current market conditions and the massive oil demand destruction so far, comprehensive international cooperation was called for to stabilise the global oil market and prevent extensive and lasting damage to the oil industry.
On world economic forecast, he said that following global economic growth of 2.9 per cent in 2019, the world economy was forecast to face a severe recession in 2020, declining by 1.1 per cent.
“Despite slight signs of improvement at the beginning of the year, expectations for global economic growth were burdened by the carry-over of weak fourth quarter of 2019 data in several key economies, which had been significantly worsened by the strong impact of the COVID-19 pandemic.
“Economic developments in times of COVID-19 are proving to be unique. Contrary to comparable economic shocks, the global economy is witnessing a combination of a supply and a demand shock, together with severe disruption in the financial markets.
“Moreover, the impact of COVID-19 is exacerbated by high global debt levels, the ongoing general slowdown in world trade, as well as challenges in manufacturing caused by slowing capital expenditure in some key economies and by the global deceleration of the automotive industry,’’ he added.
The OPEC scribe said that the underlying key assumption for the 2020 GDP growth forecast was that the impact of COVID-19 related developments outside China would continue well into second quarter of 2020.
According to him, most regions are forecast to see a slowdown through second quarter of 2020, recovering only toward the second half of third quarter of the year.
He noted that China’s trajectory was forecast to see a sharp deceleration in first quarter and to a lesser extent in the second quarter before recovering in second half of 2020.
“By the fourth quarter, global activity is assumed to have almost normalised. Nevertheless, depending on future developments, further downside risk remains.
“Positively, the sharp downturn is counter-balanced by unprecedented government-led stimulus measures designed to offset the negative economic consequences,’’ he said.