Back in March and April, the world faced its largest oil demand shock in living memory. In April, demand was 23 million barrels a day below that of 2019, the WTI May futures price contract went negative on April 20 and the global economy seemed to be teetering on the edge of the abyss. All producers were affected by this unprecedented fall in demand.
To counter this, the Organisation of the Petroleum Exporting Countries (Opec) and non-Opec producers in the Declaration of Cooperation (DoC) acted decisively and swiftly to execute the largest and longest voluntary production adjustments in the history of the oil industry. The move – which was supported extensively, including the White House – helped cushion the impact of the fall in demand and brought in some semblance of stability to the market.
The decision benefitted all producers, including the major international oil companies and those independent operators in the Permian, Bakken and Eagle Ford shale basins. It has also received support from major consumers such as India and its platform for recovery and future growth is beneficial to securing the investments required to meet the future needs of consumers.
Today, we are seeing some green shoots of recovery in the oil market on the back of voluntary production adjustments, the reopening of economies and increased travel. However, with the global economy still on an unsure footing and with the oil market not expected to see demand return to 2019 levels before 2022, the DoC will remain to take any necessary actions to help ensure a balanced and stable oil market.
The foundations for the firm actions of Opec and the DoC in 2020 can be traced back 60 years to the group's beginnings in Baghdad on September 14, 1960. Six decades of existence alone is a monumental achievement for a developing organisation and especially for one representing oil – a volatile commodity. Since the early 1970s we have witnessed seven major market cycles, including the latest in 2020, each of which has threatened the stability of the oil market and global economic development.
Throughout the organisation's history, one recurring theme that has transcended across the decades and guided the group's work to support sustainable oil market stability amid such market cycles is co-operation.
The DoC has been a platform that has built on Opec's previous co-operative efforts and has also instilled a complementary framework for the future through the endorsement in 2019 of the Charter of Cooperation (CoC). The forward-looking trajectory that underpins the CoC means that it is an important platform for participating countries, not only in helping maintain a sustainable oil market but also in evolving a future for oil and all energies in the energy transition.
Opec calls on all stakeholders to work together to find lasting solutions and take appropriate action to help sustain balance and stability in the oil market, meet future energy demand and deal with the challenge of climate change.
The energy challenges of our planet require comprehensive and flexible approaches – no single energy source is a panacea – and we should look to further advance cleaner and more efficient technologies across all available energies. We need to appreciate the nuances in the debate and balance the needs of people in relation to their social welfare, specifically energy poverty, the economy and the environment.
In looking ahead, Opec reaffirms its faith in the value of broader and deeper dialogue and co-operation. We are open to engaging with all stakeholders. We need to talk to each other and not at each other. We need to strive together to ensure sustainable growth, development and prosperity not only for our generation, but for our children and for our children’s children.
Mohammad Sanusi Barkindo is secretary general of Opec