Opening address to the 173rd meeting of the OPEC conference

Your Excellencies, distinguished delegates, ladies and gentlemen.

Good morning and let me once again welcome you for the 173rd Meeting of the OPEC Conference.

It was a pleasure to see so many of you last night at the gala dinner to celebrate the anniversary of the ‘Declaration of Cooperation’.

It was also my privilege to offer our sincere appreciation to the City of Vienna and its Mayor, the Honorable Michael Häupl, for their hospitality and support of our Organization since the Secretariat moved here in 1965.

I would like to take this opportunity to offer a very warm welcome to a number of Ministers who have assumed their position since the last OPEC Conference held on the 25th of May.

His Excellency Mustapha Guitouni, Minister of Energy of Algeria; His Excellency Eng. Diamantino Pedro Azevedo, Minister of Mineral Resources and Petroleum of Angola; and the just-appointed Minister of Petroleum and Energy of the Bolivarian Republic of Venezuela, His Excellency Manuel Quevedo.

On behalf of OPEC, I wish each one of you every success in your highly demanding positions and I look forward to closely working with you.

I would also like to extend our great appreciation for the highly beneficial efforts of your predecessors.

A warm welcome is also offered to Mustafa A. Sanalla, Libya’s NOC Chairman, who is here as head of the Libyan delegation, as well as two non-OPEC observers, His Excellency Eng. Tarek El Molla, Egypt’s Minister of Petroleum and Mineral Resources; and Mr. Japarguly Orazov, Vice-Chairman of the Turkmen Oil State Concern.

Your Excellencies, ladies and gentlemen.

I’m delighted to note that as a result of our joint efforts, the goals laid down in the Declaration of Cooperation are on track to be achieved.

When we last met in May, it was apparent that more work needed to be done, which resulted in the ‘Declaration of Cooperation’ being extended for another nine months.

The market trajectory seen since then has shown that the extension decision was right. The positive market sentiment is underscored by hard data.

In May, the OECD stock overhang was 280 million barrels above the moving five-year average, but it has since fallen by almost 50 percent to 140 million barrels for the month of October.

Crude in floating storage is also down by an estimated 50 million barrels since June, and the drawdown applies broadly to all regions, including both crude and products. In fact, products are already at their five-year average.

We have also witnessed the market structure flipping into backwardation for both Brent and WTI for the first time since 2014, indicating the market’s gradual move towards a more balanced condition.

All in all, market stability has improved and the sentiment is generally upbeat. The rebalancing trend has accelerated and inventories are on a generally declining trend.

This gratifying outcome has resulted primarily from a near 100 percent—or more—compliance to the production targets by the combined OPEC 12. OPEC’s credibility has also been enhanced, although a couple of members have lagged behind.

All producers have benefitted from this improving situation.

While recognizing some very major achievements we have made to date, we also need to acknowledge that we have only recently passed the halfway mark on the journey towards achieving the five-year average of OECD stock levels. Seasonally, we are entering the low demand period through the second quarter of 2018.

But for the mid-to-long term, the future market environment looks encouraging, underpinned by a broad-based global economic recovery that is gathering pace. GDP growth in 2017 has been robust, estimated to be around 3.6% [according to the IMF] and 3.7% for 2018.

Correspondingly, we continue to see further signs of strong oil demand. Over recent months, demand numbers have been revised upwards on a regular basis, with growth now standing above 1.5 million barrels a day for both 2017 and 2018.

This is good news, but reaching the intended mark will entail some very hard work.

History tells us that as we get closer to the goal, commitment can start to waiver. So, to achieve our goals on a sustainable basis, we must stay the course, with each member country taking full responsibility for its own contributions and not relying on others. That’s the only way to succeed.

As we have witnessed over the past two days, the hard task of tracking the progress toward realizing our targets has been guided by the Joint Market Monitoring Committee, supported by the OPEC Secretariat and the Joint Technical Committee. I would like to acknowledge their contributions and thank them for a job well done.

Your Excellencies, ladies and gentlemen.

When I assumed the OPEC Presidency at the beginning of this year I talked of not only focusing on the short-term challenges we faced, but also looking ahead in terms of OPEC and the industry’s future.

To succeed going forward, it is essential that we continue to maintain unity within OPEC. But let me hasten to add that without the support of our non-OPEC partners, the encouraging situation we see today would not have been achieved. So, we should seek to institutionalize the OPEC and non-OPEC cooperation framework, and further build on the healthy foundation we have laid.

While the short term results and their importance cannot be ignored, we need to remember that the short, medium and long terms are linked in multiple ways.

We need to continue to foster a secure and stable market in the interests of both producers and consumers. And to protect the long-term interests of consumers, we must invest in capacity. To do that, trillions of dollars must be invested in additional oil capacity and infrastructure. These staggering investments will not be forthcoming unless there is sufficient market certainty.

I’m already concerned that on top of about a trillion dollars that have been deferred or cut to date from investments, the focus is on incremental and short cycle investments, with large long cycle investments remaining on hold. In my view, this will not cut it.

The creation of the right enabling environment for the necessary investments and maintaining market stability is a collective global responsibility. On our part, we need to further strengthen cooperation between OPEC and non-OPEC producers, as well as advance dialogue with other international energy institutions, especially those representing consumers.

As we all are aware, climate change is another critical imperative that is on everyone’s mind, and we need to give it our due attention. As we did earlier this month at the United Nations Framework Convention on Climate Change (UNFCCC) in Bonn, or COP23, we need to continually engage on environmental issues, emphasizing the concurrent importance of reducing the carbon footprint of oil, the need for a combination of conventional and emerging energy sources, and the importance of developing a realistic global energy pathway to the future.

Your Excellencies, ladies and gentlemen. In conclusion, let me emphasize that we have come a long way in terms of market rebalancing and returning the market to health and stability, and I want to thank all those who fully contributed for their efforts and cooperation.

While it is evident that a lot more still needs to be done to meet our goals in a sustainable manner, I am confident that through collaboration, adaptability and determination, we will successfully respond to what lies ahead. I look forward to continuing to work with each of you to extend our success in strengthening short-term market conditions, so that our nations and the global economy as a whole can enjoy the benefits of stable and sustainable petroleum markets in the long term.

Thank you for your attention.

By HE Khalid A. Al-Falih, Saudi Arabia’s Minister of Energy, Industry and Mineral Resources, and President of the OPEC Conference.

Vienna, Austria
30 Nov 2017