OPEC needs to keep oil supply deal as demand faces challenges

The Organization of Petroleum Exporting Countries (OPEC) needs to continue to work with oil producers to manage oil supply, as demand for crude oil is facing challenges, OPEC’s secretary-general Mohammad Barkindo told Bloomberg in an interview on Sunday.

The historic supply deal between Saudi Arabia, Russia and other oil producers, which was reached in late 2016 needs to be permanent, he said, adding that demand is strong, but crude use is facing ‘headwinds’.

Low crude prices hit the oil industry and deprived it of investment, leaving continued cooperation among producers as they only way to maintain market stability markets, he added.

“We have seen the sharpest contraction in investments across the supply chain for two consecutive years of more than 25 percent each, in an accumulative term in the region of over $1 trillion of investments that have been cancelled, deferred or frozen. This has its impact not only in our ability as industry to meet current demand, which is in the moment robust despite some of the headwinds, but in the medium to long term,” he said.

Crude is averaging about $72 a barrel this year, and the International Energy Agency warned last week that prices could rise above $80 a barrel unless producers make up for lost supply from OPEC members Iran and Venezuela.

Saudi Arabia and Russia led OPEC and allied producers in agreeing to cap output starting in January 2017 to curb a glut. They changed course in June and have since pledged to ensure that supplies are adequate to meet demand.

A committee of OPEC and non-OPEC members is set to meet next week in Algeria to review compliance with the production targets.