*Investments choked-off by 27% in both 2015, 2016
22 February 2018, Sweetcrude, Lagos — The OPEC Reference Basket price fell by an extraordinary 80% between June 2014 and January 2016, Secretary-General of the Petroleum Exporting Countries, Mohammed Barkindo has said.
Barkindo who made the statement in his Keynote address at the maiden edition of the Nigeria International Petroleum Summit, in Abuja, said as a result of the fall, investments were choked-off, with exploration and production spending falling by an enormous 27% in both 2015 and 2016.
The OPEC Reference Basket (ORB), also referred to as the OPEC Basket, is a weighted average of prices for petroleum blends produced by OPEC members. … Since January 1, 2017, the OPEC reference basket consists of a weighted average of the following crudes: Saharan Blend (from Algeria) Girassol (from Angola).
Oil prices crashed 2014 from around $120 per barrel to an all-time low of $20 per barrel in 2014 as a result of the glut in the market.
“Nearly one trillion dollars in investments were frozen or discontinued, and thousands of high-quality jobs were lost”.
As a result, OPEC and its partners, especially Russia, held a Declaration of Cooperation, agreeing to cut a combined 1.8 million barrel per day of output since January 2017 to boost oil prices.
The agreement which recorded an over 100 percent conformity, has since rallied oil price to $70 per barrel as at January this year.
“A record number of companies in our industry filed for bankruptcy”, he said.
“Our industry was on life-support and a medical breakthrough was necessary to revive it. Thankfully, a breakthrough came in the form of the historic Declaration of Cooperation, which the Minister (Ibe Kachikwu) played a key role in securing the adoption of. This landmark decision was the culmination of the extensive consultations undertaken throughout 2016, which aimed to build consensus about the strategic urgency of rebalancing the global oil market in a collective manner”.
Speaking further, Barkindo said from 2014 to 2016, world oil supply growth outpaced that of oil demand, with world oil supply growing by 5.5 mb/d, while world oil demand increased by 4.1 mb/d.
By July 2016, the Organisation for Economic Co-operation and Development, OECD commercial stock levels reached a record high of about 386 mb over the five-year average, he added.
The first Declaration of Cooperation was agreed upon on 10th of December 2016 in Vienna by twenty-four countries.
It was extended for another nine months commencing on the 1st of July 2017 at the OPEC non-OPEC Ministerial Meeting, held on the 25th of May 2017.
Following the third OPEC and non-OPEC Ministerial Meeting on the 30th of November 2017, the Declaration of Cooperation was amended to take effect for the entirety of 2018.
“If one word was used to describe the impact of the Declaration of Cooperation, it would be ‘transformative.’ A new player has emerged on the global oil scene: the OPEC-non-OPEC strategic partnership; conformity has been at a record-breaking high and the market rebalancing process has gained massive momentum. Not bad for a partnership which many cynics did not think would get off the ground in the first-place!”
“Conformity averaged 107% per month in 2017, across all participating countries. I am pleased to announce that January’s conformity level will be released in a few hours, which will be 133% in January 2018”.