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OAPEC LAUNCHES ITS QUARTERLY REPORT ON GLOBAL PETROLEUM SITUATION

The Secretary-General of the Organization of Arab Petroleum Exporting Countries (OAPEC), HE Engineer Jamal Al Loughani, stated that, within the framework of periodic follow-up of global petroleum market developments, the Secretariat launched The First Quarterly Report for The Year 2024 on the Global Petroleum Situation, which covers key indicators developments of the global petroleum market, including demand, supply, stocks movement, prices and factors affecting them, oil trade movement, etc.

Al Loughani said that the global economy performance witnessed steady growth during the first quarter of 2024, coinciding with a strong performance of labour markets with major support from government and consumer spending that exceeded expectations, and a decline in inflation rates that approached their target rates, with the expectation that central banks will move towards facilitating monetary policies in many economies. The global economy is expected to grow at a rate of 3.2% during the year 2025, which is the same rate prevailing during the current year 2024.

The Secretary General highlighted the rise in the monthly rate of crude oil prices during the first quarter of 2024 due to the decline in speculative activity in futures sales, the ongoing geopolitical tensions and the increasing risks in the Eastern Europe following the targeting of the oil infrastructure in the Baltic Sea. This is in addition to interrupted supplies in various production areas, and the fact that a large amount of US production was halted due to weather conditions, as well as the noticeable decline in US oil inventories, and disruptions to trade flows. He added that the average spot prices of the OPEC basket of crude oil (on a quarterly basis) witnessed a decline of 4% compared to the previous quarter, reaching about $81.8 per barrel. Brent crude contracts and West Texas crude futures contracts recorded quarterly losses of about 1.1% and 1.7% respectively, mainly influenced by concerns about the growth of the Chinese economy - the world's largest oil importer.

Al Loughani added that global oil supplies (crude oil and natural gas liquids) witnessed an increase of 0.7% compared to the previous quarter, reaching about 102.1 million barrels per day. Countries outside OPEC such as Russia, Latin American countries, and China were behind this growth in supplies. However, supplies from OPEC countries decreased by 0.4%, reaching about 32 million barrels per day, coinciding with many OPEC+ countries taking additional voluntary cuts in production. US production of shale oil also decreased during the first quarter of 2024 by 2.3% on a quarterly basis, which is its first decline since the first quarter of 2022, and its highest since the first quarter of 2021, reaching about 9.7 million barrels per day. This decline is mainly due to winter storm “Heather,” which caused the decline of major shale oil production areas.

Regarding global oil demand, Al Loughani said that it has risen by 0.3%, reaching 103.5 million b/d, supported mainly by the rise in demand in the Asian and Pacific countries that are members of the Organization for Economic Cooperation and Development, Latin American countries, India, and other Asian countries- other than China, whose economy continued to be affected by the real estate sector crisis and the contraction of manufacturing sector activity.

Al Loughani added that in terms of international groups, the non-OECD countries’ oil demand during the first quarter of 2024 increased significantly, that is, by about 680 thousand barrels per day compared to the previous quarter, reaching about 57.9 million barrels per day. Whereas the demand of the OECD countries decreased by about 330 thousand barrels per day, reaching about 45.7 million barrels per day.

The Secretary General said that total global oil reserves (commercial and strategic) rose by 1.6% on a quarterly basis to reach about 9.1 billion barrels. He attributed this to the rise in stocks in countries outside the Organization for Economic Cooperation and Development. He also pointed to the increase in oil reserves at sea as a result of geopolitical tensions in the Middle East, which caused tankers to sail longer routes, and to the increase in strategic reserves coinciding with the United States of America’s intention to refill its strategic reserves during the current year. Al Loughani said that bringing commercial oil reserves in OECD countries to the average level of the previous five years is one of the most important goals of the production reduction agreement between the OPEC+ countries to achieve balance and stability in global oil markets. In this context, the level of these stocks continued to decline from the average of the previous five years (2019-2023), as this decrease reached about 38 million barrels at the end of the first quarter of 2024.

Regarding global oil trade, Al Loughani pointed out that the United States of America continues to be a net importer of crude oil and a net exporter of petroleum products, as net American oil exports (including crude oil and petroleum products) reached about 2.5 million barrels per day. On the other hand, China's net oil imports stabilized at the same level achieved during the previous quarter, amounting to about 11 million barrels per day. Meanwhile, India's net oil imports rose by 7.1% on a quarterly basis to reach about 4.9 million barrels per day.

As for the global crude oil refining industry, Al Loughani stated that its performance has witnessed a slight improvement, as refined petroleum products from refineries in countries outside the Organization for Economic Cooperation and Development have increased, mainly in the Middle East countries, with the start of operations of the Omani Duqm refinery with a production capacity of 230 thousand barrels per day, and the Kuwaiti Al Zour refinery reaching its maximum capacity of 615 thousand barrels per day. It should be noted here that the Al Zour refinery is one of the largest oil refineries in the world, whose cost exceeded $16 billion, and which produces high-quality petroleum products that comply with the standards of global environmental requirements. The productivity of India’s refineries also increased, while the China’s refineries productivity increased relatively. On the contrary, refinery activity in Russia decreased, affected by the targeting of refinery infrastructure in light of the continuing geopolitical tensions in Eastern Europe. The activity of American and European refineries declined, while the activity of refineries in Asian and Pacific countries increased.

Al Loughani pointed out that the value of the member countries’ estimated crude oil exports during the first quarter of 2024 decreased by 7.7% on a quarterly basis to reach about 121.9 billion dollars. This is due to the decrease in exports, coinciding with many OPEC+ countries making additional voluntary cuts totalling about 2.2 million barrels per day (including five member countries that accounted for 71.6% of the total reduction), with the aim of maintaining stability and balance in global oil markets.

The Secretary General noted that developments in the global petroleum market have cast a shadow on the economic performance in the member countries during the first quarter of 2024, as the positive growth in output levels in the oil sectors of those countries continued to slow down. This is mainly due to the slowdown in global trade in light of the escalating geopolitical tensions in the Middle East region, the tightening of financial conditions and the accompanying pressure on economic activities, which had a limited impact on some member countries in light of the surplus liquidity in their banking systems. The slowdown is expected to continue in the short run, coinciding with the decision of OPEC+ group (including five of OAPEC members) to extend the additional voluntary crude oil production cut. This may have a negative impact on oil revenues in OAPEC member countries, which are considered among the most important sources of national income and contribute to sustainable development.

Regarding the prospects of the global oil market in the short run term, Al Loughani explained that the oil market is surrounded by a state of uncertainty that makes it difficult to determine a specific level that oil prices may reach. He explained that OPEC forecasts indicate a decrease in the total oil supplies of the non-OPEC producing countries in the second quarter of 2024 to 69.8 million barrels per day, while total global demand for oil is expected to rise to 103.8 million barrels per day.
The Secretary General added that these forecasts are still subject to a state of uncertainty linked to many doubts and fears, the most important of which are the discrepancies in the recovery performance of global economies, the continued tightening monetary policy by major central banks, and the continuation of geopolitical tensions in the Middle East and Eastern Europe, which played a major role in the recent decision of the OPEC+ group of countries during the Ministerial Council Meeting No. 37, which was held on June 2, 2024, extended the additional voluntary cuts announced in April 2023, amounting to 1.65 million b/d, until the end of December 2025. In addition to extending of the additional voluntary cuts announced in November 2023, amounting to 2.2 million B/d until the end of the third quarter of 2024, before these reductions are then phased out gradually and equally on a monthly basis until the end of September 2025, and the monthly increase can be stopped or reversed (converted to a reduction) according to oil market conditions. This reflects the continuous and diligent effort to enhance precautionary efforts aimed at achieving balance and stability in the global oil market.
On climate change- related developments, Al Loughani pointed to the most important outcomes of the high-level dialogue that brought together OPEC and the Presidency of the Climate Change Conference (COP29), which will be held in Azerbaijan, during the period 11-22 November 2024, which are as follows:

• Commitment to promoting all applicable solutions and technologies that will enable all countries to contribute to global climate action, in a nationally defined manner.

• Emphasizing that the United Nations Climate Change Conference (COP29) represents an opportunity to underscore the necessity of economic diversification in a way that is compatible with the needs, priorities and resources of all countries, especially in the context of promoting sustainable development, eliminating poverty, and ensuring energy security.
In this regard, Al Loughani stressed that there is no one-size-fits-all solution to confront climate challenge, and that there is a need for diversification and multiple paths that take into account the different national circumstances and approaches of each country.
Al Loughani concluded his statement by hoping that this report will continue to be a useful and helpful tool for future energy policy makers in the organization’s member countries.