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According to Mohammad Sanusi Barkindo, secretary-general of OPEC, the enormous and unprecedented oil market imbalance facing the industry in April following the COVID-19 pandemic required an unparalleled response from producers

Underlining the importance of the two-year agreement signed in the Declaration of Cooperation (DoC) on 12 April by OPEC and non-OPEC oil producing countries and revalidated earlier this month on 6 June, Barkindo said he was confident that more stability would return to the oil markets in the second half of the year, but more work is needed to draw up existing oil inventories to help rebalance markets.

“As we see countries begin to open up, we will see demand start to come back,” Barkindo said. “I remain optimistic but cautious the worst is over and a recovery will be in full swing in the second half of this year, with stocks beginning to be withdrawn. However, what shape the recovery will take, whether a V shape, W or inverted hockey stick, is still uncertain.

“Nevertheless, I am hopeful by the end of this year we will begin to see some further semblance of stability restored to oil markets. Then we will be in a position to move into the next phase of sustaining that stability. Hence the importance of the two-year duration of the historic agreement signed by the OPEC Plus group of countries and non OPEC producers.”

Setting out the scale of the “unprecedented demand destruction” suffered by oil markets in April, Barkindo said oil demand had fallen by 20 to 24 mmbbl a day, from a high of 100 mmbbl per day, as economic and societal lockdowns, in response to the COVID-19 coronavirus, ravaged the global economy.

It led to the largest single supply adjustment in history with OPEC and non-OPEC producers adjusting oil output, including from those outside of the DoC, by almost 20 mmbbl a day.

Stressing the criticality to the global economy of restoring stability to oil markets, Barkindo said he had seen projections predicting a contraction of nearly 20 per cent, or US$1.5 trillion, in energy investments due to market volatility and uncertainty.

“Investors in all sectors of the economy are allergic to uncertainties. Therefore, it is important we restore stability and sustainability to oil markets, not only for producing countries but also for consuming countries. Both know a lack of investment in energy today will sow the seeds of another energy crisis in the medium to long term. That would not be in the interests of the global economy,” Barkindo explained.

Turning to the energy transition and the environment, Barkindo said that addressing carbon emissions would remain a central challenge for the post-COVID-19 oil and gas sector. He urged the global community to tackle the twin challenge of climate change and energy poverty and added that in the medium to long term all energy sources would be needed to meet global energy demand.

“There are over 7.5bn people in our world. By 2040 the global population will increase by 1.6bn people. Climate change and energy poverty are two sides of the same coin and only the global community, working together, can tackle this issue,” Barkindo concluded.