1. Let’s return to just two months ago: April. On April 12, 2020, OPEC, Russia and other allies, a group known as OPEC+, decided to cut their daily oil production by 10 million barrels. Prince Abdul Aziz Bin Salman, Saudi Arabia's Minister of Energy, also announced that same time that non-OPEC+ oil-producing countries such as the United States and Canada had pledged to work with OPEC+ to balance the oil market, reducing the total production of OPEC+ and non-OPEC+ producers by 19 million barrels per day; a number that was a puzzle in itself and the release of details that contained a combination of numbers did not help to solve it. I believe that solving this very complex puzzle has challenged mathematics as a science! But a few days after the decision and the announcement of the Saudi prince's cooperation with the non-member countries of the OPEC+ to balance the oil market, President Trump announced that OPEC countries themselves would reduce production by 20 million barrels per day alone! Working with countries such as the United States and Canada has shown that they would work with OPEC countries just as long as they have a natural decline in oil output or are forced to suspend production due to falling prices.

2. But that wasn't the whole story. OPEC Secretariat's technical and analytical department, which in recent years has turned into a backyard for some countries, released its monthly report in April, a few days after the historic OPEC+ agreement. To support the group’s output cut policy by 9,700,000 barrels in May and June 2020, the report forecast that with the implementation of this policy, oil supply glut in the second quarter of 2020 would reach 3.640 million barrels per day and that the market would rebalance very easily. OPEC Secretariat also estimated the demand for its oil in the second quarter at 19.73 mbd; forecasts that sharply differed from those published by the International Energy Agency (IEA) for the same month. The IEA report for April showed that the oil supply glut in the second quarter would be about 15 million barrels per day and demand for OPEC oil in the second quarter would reach 8.5 million barrels. This is while the difference between the forecasts of OPEC Secretariat and the International Energy Agency has never exceeded one million barrels per day, let alone more than 10 million barrels. The OPEC Secretariat's move is a clear example of manipulating figures to make the unprecedented policy of reducing production by about 10 million barrels a day, a success. OPEC Secretariat, however, revised all of these figures in its May 2020 report and returned to the original path.

3. The sloppiness of OPEC Secretariat does not end with the technical side of the matter; arrangements prior to the OPEC+ Ministerial Meeting may have been the culmination of these irregularities. For the first time since signing of the Declaration of Cooperation in 2016, OPEC Secretariat did not hold two joint ministerial committee meetings to monitor the OPEC and Non-OPEC Agreement (JMMC) and the Joint Technical Committee (JTC) before the OPEC and OPEC+ ministerial meetings. As planned, the 19th JMMC and 41st JTC meetings were to be held prior to the ministerial meetings to present their proposals for a short-term forecast of oil supply and demand, as well as the countries' commitment to the production cut agreement. The two committees were not convened on the pretext that they had not received enough information from the secretariat. Speculations for not holding the meetings indicated that OPEC+ members were less committed to the initial figures, and that OPEC+ ministers did not want to send that negative signal to the oil market. However, preliminary statistics show that OPEC+ members such as Iraq, Nigeria and Kazakhstan had not met their commitments to reduce production. Of course, it was predictable that for countries with a strong dependence on oil export revenues, it would not be possible to fully commit to a significant reduction in production in the face of falling oil prices, and the stakes would be high for cheating. Government revenues have deteriorated so much that many have reconsidered their 2020 budgets. How would anyone forego free rides in a bullish market at times rivals curb their supplies to the market?

4. The timing of the OPEC and OPEC+ ministerial meetings was no exception in being plagued by the secretariat’s sloppiness. It was as if the secretariat did not intend to do anything in an orderly manner. The ministerial meeting was scheduled to take place on June 9, according to a final statement in the April meeting, but took everyone by surprise after a letter from Mohamed Arkab, Algeria's Minister of Energy and President of the OPEC Conference 2020, that had requested for an early meeting. OPEC Secretariat's silence on Algeria's request, on the one hand, and certain countries’ media support for the proposal, on the other, left holding the meeting to media speculations. Some blamed disputes between Iraq and Saudi Arabia for the discrepancies, while others blamed rumors of Iraq's exit from OPEC. All this confusion in holding a meeting and announcing its time, if not unprecedented, is rarely seen ever. In the midst of all this confusion, OPEC Secretariat suddenly and without any formal correspondence announced on Friday, June 5, that 24 hours later, the OPEC-OPEC+ meeting would be held through videoconference. The meeting, which was mostly ceremonial, was spent on reading the agendas and having the ministers raising their hands to confirm what had been previously agreed upon.

5. Finally, the OPEC Secretariat is working hard these days to display the process of re-balancing the oil market very optimistic and fast; something unlikely given the uncertainties in the oil market. Coronavirus's second wave and the possibility of a resurgence of lockdowns and social distancing, as well as a significant increase in government and private debts, and growing concerns about partial destruction of oil consumption due to the development of online employment and telecommuting, are among the most important factors keeping us from being exactly optimistic about reviving the oil market in the remainder of 2020. When you live in the COVID-19 era, you got to wait every day for a new historical record to be set. From crude oil being traded in the negative territory and the level of oil inventories reaching the maximum capacity to reduced oil demand by more than 30 million barrels per day in just one month; from the price war between Russia and Saudi Arabia by flooding the market with crude oil at the height of the decline in oil consumption to threats and perhaps various kinds of insults from US officials against Saudi Arabia for reducing production and saving the US oil industry. We are really in a special situation in the history of the oil industry.

By Roya Khaleghi