Olusola Bello
The Organisation of Petroleum Exporting Countries (OPEC) has expressed concerns about the expected return of Iranian production and exports to global markets, saying that it anticipate it will occur in an orderly and transparent fashion, thereby maintaining the relative stability that the organization has worked hard achieve since April of last year.
The organization said that Iran was one of the founding members of the organization and therefore the country is extremely valued, just as it stated that OPEC is also closely monitoring developments related to the Joint Comprehensive Plan of Action.IR Iran.
Mohammad Sanusi Barkindo, OPEC Secretary General expressed this concerns at 52nd Meeting of the Joint Technical Committee (JTC) of OPECT+.
On the factors affecting global oil market, he said “there are many ‘moving parts’ when it comes to factors affecting the global oil market, such is the pace of change during the pandemic, it can be difficult to synthesise developments.”
He however, explained that the major headlines over the last month have been helpfully alliterative and concern the ‘three i’s:’ Injections; Inflation; and Investments.
The OPEC chief said in the interests of cogent analysis, he will try and shoehorn market developments since the committee last met into these three broad categories.
“The importance of injections ̶ the vaccination rollout ̶ in overcoming the pandemic and contributing to a recovery in the global economy and oil demand has become more apparent every month since countries first approved their use late last year.”
In terms of the oil market, he stated that a few developments are noteworthy. Largely as a result of the progress of the vaccination campaigns in certain regions, the Secretariat has now revised up our global economic growth forecast for 2021, by 0.1 pp to reach 5.5% y-o-y. World oil demand is expected to increase by 6.0 mb/d in 2021, unchanged from last month’s estimate, to average 96.5 mb/d. Non-OPEC liquids productionfor 2021 is revised down by 0.2 mb/dm-o-m, and is forecast to grow by 0.7 mb/d.
According to him, more than 1.84 billion doses have been administered worldwide, which equates to roughly 24 out of 100 people. “Of course, there has been massive variations by continent;
He explained that OPEC+, have seen variations in the progress of developed countries. “Europe, after its rather slow start, is making rapid progress with its rollout. For example, in Austria, over 50% of the population have received a first dose. This is above the European average, but across the continent, the reduction in caseloads and increase in vaccinationrates have prompted a general relaxation of lockdown measures.
Turning to the second of the ‘i’s’: inflation; he said, this word, or at least the possibility of inflation, has received a lot of column inches and been at the forefront of discussions among central bankers, especially with regard to the trajectory of current monetary policy.
This, he explained, is understandable as inflation could jeopardise any post-pandemic recovery.
“Some inflationary signals that require careful monitoring include commodity price rises-as exemplified by timber, copper and iron ore; the soaring costs of used cars in the US and property prices. There are labour shortages in some parts of the world, along with supply chain bottlenecks. Central bankerswillhave a difficult task in balancing their ‘average inflation targeting’ with the loose monetary policy that is designed to help lubricate the post-pandemic recovery.
This leads us to the final of the three ‘i’s’, and one which is the lifeblood of this industry: investments. This topic regularly shapes the sector-wide discourse and received added prominence this month, courtesy of the IEA.
“There is much to digest in their report entitled, ‘Net Zero by 2050,’but their call for energy groups to stop all new oil and gas exploration projects by 2050 may have an impact on an investing climate already severely affected by board-member activism. Questions remain as to the impact that a 75% reduction in global oil demand would have on the development of emerging economies. While the IEA has acknowledged that “continued investment in existing sources of oil production is needed,” the ramifications of this report on policy makers requires careful monitoring.
Achieving net zero emissions would be challenging for an economy, including advanced economies. “The scenario outlined by the IEA is extremely ambitious and require radical change to daily life as we know it. The claim that no new oil and gas investments are needed post 2021 stands in in stark contrast with conclusions often expressed in other IEA reports and could be the source of potential instability in oil markets if followed by some investors”.
