We focused on OPEC oil production, during this period of COVID-19, to ascertain how COVID-19 has affected OPEC oil production, and predict what the level of production would be by December 2020. Since the outbreak of COVID-19, the world oil market had witnessed a significant setback as the demand for crude tumbled due to actions taken to curb the proliferation of COVID-19. Though OPEC and non-OPEC countries had earlier made efforts to ensure a stable a market, the unprecedented fall in the oil demand will no doubt take a toll on the production of crude oil. We sourced time-series data from OPEC market indicators and established the relationship between COVID-19 and OPEC oil production using the Vector Error Correction Model. We further carried out an ex-ante forecast of OPEC oil production using Root Mean Square Error and Theil Inequality Coefficient. From our analysis, we affirm that world demand for crude oil negatively affects OPEC oil production. COVID-19 effect on OPEC oil production is well explained in the negative relationship between OPEC oil production and world demand for oil. The ex-ante forecast revealed that there is no significant difference in actual values of OPEC oil production and the predicted values. We conclude that OPEC can maintain its oil production level without a further cut in production quota. We recommend a gradually increase the oil production quota since the global economy is gradually reopening, and a continuous negotiation with non-OPEC countries on oil prices into others to ensure a stabilized oil market.
Volume 12 | Issue 8
Pages: 393-402
DOI: 10.5373/JARDCS/V12I8/20202487