The price of crude oil has begun to pick up steadily after experiencing a dip mainly driven by the impact of the Coronavirus pandemic on the world economy.

Current developments in the global market indicates that the price of the OPEC basket of thirteen crudes stood at $ 53.84 a barrel on Thursday, January 7, 2021, compared with $ 53.29 the previous day, according to OPEC Secretariat calculations.

In the last week, crude oil prices have increased by 7.17%, up from $50.24 per barrel on December 31, 2020, to $ 53.84 per barrel yesterday, Thursday, January 7, 2021. Since December 23, 2020, when the price of crude oil was $49.46, it has since risen above $ 50 per barrel within the last 2 weeks.

Chart 1 Crude Oil Price Per Barrel ($)

Source: OPEC

During the 13th OPEC and non-OPEC Ministerial Meeting (ONOMM), held via videoconference, which concluded on Tuesday, 5th January 2021, OPEC reaffirmed the continued commitment of the participating countries in the Declaration of Cooperation (DoC) to a stable market in the mutual interest of producing nations; the efficient, economic, and secure supply to consumers; and a fair return on invested capital.

The Meeting which highlighted the unprecedented events of 2020 and the shocking impact of the COVID-19 pandemic on the world economy and markets, commended the DoC participating countries for undertaking the largest and longest crude oil production adjustments in history in response to the exceptional challenges and market conditions caused by the pandemic.

It pointed out that rising infections, the return of stricter lockdown measures, and growing uncertainties have resulted in a more fragile economic recovery that is expected to carry over into 2021. The Meeting recognized that market sentiment has been buoyed recently by vaccine programs and improved asset markets, but underscored the need for caution due to prevailing weak demand and poor refining margins, the high stock overhang, and other underlying uncertainties.

The Meeting acknowledged the need to gradually return 2 mb/d to the market, with the pace being determined according to market conditions. It reconfirmed the decision made at the 12th ONOMM to increase production by 0.5 mb/d starting in January 2021 and adjusting the production reduction from 7.7 mb/d to 7.2 mb/d.

The adjustments to the production level for February and March 2021 to be implemented were given to members during the meeting. Production adjustments for April and subsequent months will, however, be decided during the monthly ONOMM following the criteria agreed upon in the 12th ONOMM.

The Meeting reiterated the need to continue closely monitoring market fundamentals, including non-DoC supply and its impact on the global oil balance and overall market stability.

The Meeting noted that high conformity levels have contributed significantly to market rebalancing and stability. Between May and November, participating OPEC and non-OPEC countries contributed to reducing the global supply by approximately 1.9 billion barrels, including voluntary adjustments, and this has been key to the rebalancing of the market.

The meeting drew attention to the exceptional year of 2020 as an outlier that distorts the latest five-year average of OECD commercial oil stock levels. It recommended retaining the 2015-2019 average as a more representative metric while keeping the latest five-year average for the time being.

Furthermore, the Meeting expressed appreciation to participating countries, particularly the United Arab Emirates (UAE) and Angola, which have performed beyond expectation. At the same time, it reiterated the critical importance of adhering to full conformity and compensating the overproduced volumes per the statements of the 11th and 12th ONOMM, to achieve the objective of market rebalancing and avoid undue delay in the process.

It requested all underperforming participating countries to submit their plans for implementation of the required compensation for the overproduced volumes to the OPEC Secretariat by 15 January 2021.