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IEA: The Global Oil Glut Is Gone

IEA: The Global Oil Glut Is Gone

In its latest report, the…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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OPEC Withheld 1.3 Billion Barrels Of Oil To Prop Up Prices

The Organization of Petroleum Exporting Countries withheld some 1.3 billion barrels of oil supply last year to keep prices from falling even further, the secretary-general of the cartel said.

“I am sure each and every one of us can recall the dire situation the industry was in, which was most dramatically illustrated on 20 April 2020 when the price of WTI went negative. It was a visceral day, and one often described as ‘Black Monday.’” Mohammed Barkindo said, speaking at the S&P Global Platts Americas Petroleum and Energy Conference.

“It was a time when the industry faced a potential crude oversupply of nearly 1.3 billion barrels. There were even deep concerns that some storage hubs could actually reach tank tops. Thankfully, this never came to pass, in part due to the decisive actions of the DoC [the Declaration of Cooperation]. Since then the DoC has shown great courage and flexibility and has adapted as and when necessary to changing market dynamics, particularly with the post-summer advent of second and third waves of COVID-19.”

OPEC+’s intervention into the global oil supply situation was indeed crucial for reversing the oil price decline that saw WTI dive below zero, even though the latter event was as much a result of speculator moves as of oil’s fundamentals, if not more so.

This intervention has reasserted OPEC as a factor to be reckoned with on oil markets after growing doubts about the organization’s relevance amid the rise of U.S. shale. Indeed, Barkindo noted that OPEC’s work is far from done as the pandemic is still around despite the good news about the start of mass vaccinations in most parts of the world.

“Vaccines offer some much-needed light at the end of the tunnel, but the ever-increasing number of COVID-19 cases, and sadly the human loss as well as renewed lockdowns, are a harsh reminder of how delicate the situation remains,” the official said.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on January 28 2021 said:
    Both the global economy and the global oil industry owe OPEC+ a huge debt of gratitude for its efforts to stabilize the global oil market and prices.

    At the height of the most destructive event since the Great Depression of 1929, only OPEC+ stood between the COVID-19 pandemic and the total collapse of the global oil industry. OPEC+ production cuts have accelerated the depletion of the global oil inventories from an estimated 1.3 billion barrels of oil in April 2020 to around 250 million barrels now.

    OPEC is now recognized by friend and foe as the most important pillar in the global oil market.

    Let us hope that US shale oil drillers have learnt a salutary lesson from the pandemic ordeal to not undermine OPEC+ efforts to prop up oil prices and try to gain market share at its expense. They should adopt the fair principle of live and let live.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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