The OPEC / Non-OPEC Joint Ministerial Monitoring Committee (JMMC) wrapped up its 7th meeting in Muscat here yesterday with a commitment to keeping in place an agreement to cut global oil production for the entirety of 2018. That agreement is enshrined in the ‘Declaration of Cooperation’ at which 24 OPEC and non-OPEC producers, including the Sultanate of Oman, pledged to cut a total of 1.8 million barrels per day (bpd) of crude from their aggregate production — a step that has helped accelerate the stabilisation of the global oil market. Just over 12 months since the landmark pact went into effect, compliance with the ‘voluntary production adjustments’ agreed by the 24 signatories averaged a remarkable 107 per cent per month in 2017, the JMMC — the high-level monitoring panel — announced here yesterday. The conformity level for December 2017 was a record-breaking 129 per cent — the highest since the Joint Ministerial Monitoring Committee was set up a year ago. Addressing international and local journalists at the conclusion of the daylong JMMC meeting, Saudi Energy Minister Khalid al Falih, who is Co-Chair of the Committee, said the high compliance levels boded well for efforts to drain the huge global inventories of crude built up in previous years — stockpiles that have held back a strong rally in international oil prices.
“Throughout 2017, we have seen an improvement in conformity levels every month, and there is no reason not to expect the trend to continue in 2018,” said Al Falih. “The improvement is a result of two things: Overperforming countries continuing to do better, and underperforming countries, especially Iraq, making significant improvements.” Conference calls made during the JMMC meeting with the energy ministers of both Iraq and Kazakhstan elicited “reassuring responses” about their respective commitments to adhering to their ‘production adjustments’ in 2018, the Saudi minister said. “So I’m reasonably assured, with solidarity from the 24 participating countries, that 2018 will be even better than the 107 monthly per cent average we saw in 2017,” he stated. In a statement issued after the conclusion of its meeting in Muscat, the JMMC said: “Conformity levels have increased on a monthly basis from 87 per cent in January to the outstanding current level. Once more, the unwavering resolve of participating countries to rebalance the market has been amply demonstrated.” While welcoming the overall results of the past year, the Committee however urged the participating countries to intensify efforts to achieve stability in the global oil market.
“The JMMC will strive to maintain or exceed full conformity by all participating countries throughout 2018,” the statement said.
The Committee heard that around two-thirds of the overhang in global crude stockpiles have been depleted as a result of the production cuts. The remainder one-third volume is expected to be eliminated before the eliminated by the end of this year, thereby helping achieve a rebalanced oil market, the panel noted.
Importantly, JMMC Co-Chair Khalid Al Falih also urged OPEC and non-OPEC producers to be prepared to “stay the course” beyond 2018 should projections by the International Energy Agency (IEA) of a new stock build materialising next year.
“Despite high levels of conformity and despite commitments to maintain what we have done in 2017 through 2018, (the IEA is) predicting a stock build. If that materialises, we have to not only stay the course for 2018, but we have to consider rolling it into 2019. If the picture changes, we will adjust course. As I have always said, let’s hope for the best, but let’s also be prepared to deal with an adverse slow rebalancing. Personally, I think, we will achieve a rebalancing by the end of 2018.”
He also alluded to the possible “permanency” of the existing partnership between OPEC and non-OPEC members that would help respond to future challenges.
The JMMC also noted that the market had responded positively to the concerted efforts of participating nations to the “benefit of producers, consumers and the global economy alike”. Recent data, it said, confirmed that global oil demand growth will continue on a positive trajectory in 2018, buoyed by the strong performance of the global economy, it added. Represented at the JMMC meeting yesterday were officials from Saudi Arabia, Russia, Kuwait, Libya, Algeria, United Arab Emirates and Venezuela, besides the Sultanate of Oman. OPEC’s Secretary General Mohammed Barkindo was present as well.