Barkindo says Opec+ ready to adjust plans if needed

Opec and its non-Opec partners stand ready to change their production cut pact if needed, Opec secretary-general Mohammed Barkindo said today, acknowledging that the recovery in oil demand growth is "anaemic."

"When we met earlier in the year we were hopeful, almost optimistic, that the second half of 2020 would begin to see a recovery," Barkindo told the virtual India Energy Forum by CERAWeek. "But unfortunately, both economic growth and the recovery in oil demand remain anaemic at the moment, due largely to the spread of the [Covid-19] virus."

Opec and its allies, known collectively as Opec+, are to raise their collective crude output by around 2mn b/d from 1 January in the third and final stage of their agreement. This will taper their combined cut from 7.68mn b/d to 5.76mn b/d until April 2022.

Renewed demand-side concerns over second and third Covid-19 waves, coupled with increasing crude output from Libya, which is exempt from the cuts agreement, have raised questions about whether the oil market will be able to absorb the extra supply come 1 January. But as of last week the alliance showed no signs of veering away from its plan. The Joint Ministerial Monitoring Committee (JMMC), which oversees compliance with participating countries' production quotas, made no recommendation that Opec+ should make changes, only urging it to remain "vigilant and proactive" in the face of market volatility.

But with Libyan production steadily ramping up following last week's agreement of a permanent ceasefire, Barkindo said that the group would be ready to change its plans if and when required.

"What we agreed with our partners… was to do what we know best: to continue to not only implement our decisions, but also adapt to the changing realities," he said. "We are determined to assist the market to restore stability by ensuring that the stock drawdowns continue."

Although Covid-19 case numbers are rising at a faster rate than last month, Barkindo said he does not expect to see oil demand contract in the same dramatic manner as the "near 23mn-25mn b/d collapse" in the second quarter.

"We remain hopeful that governments around the world, having learned the lessons of what transpired in the second quarter, and the consequences of the lockdowns on the economy and on society… will try to modify their response measures in the event that a second or third wave materializes," he said.

"We remain cautiously optimistic that the recovery will continue," Barkindo said. "It may take longer, but we are determined to stay the course."

By Nader Itayim