The grouping of the world’s largest oil-producing countries, the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, decided to cut oil production by 2 million barrels per day.
- This is the largest cut since the beginning of the Covid-19 pandemic. Brent crude, the international benchmark, was up 28 cents or 0.3%, at $92.08 a barrel after the cut was announced, reported Reuters.
GS II- International Relations
Dimensions of the Article:
- India’s crude oil imports from OPEC
- About Organization of the Petroleum Exporting Countries (OPEC)
- What is OPEC+?
- Why are they slashing production?
India’s crude oil imports from OPEC
- In FY08, OPEC oil accounted for almost 88 percent of India’s crude imports.
- Because refiners in Asia’s third-largest economy are buying cheaper Russian oil, its percentage of India’s overall imports may drop.
- Russian oil, on the other hand, continues to account for less than 1% of India’s crude imports in FY22.
About Organization of the Petroleum Exporting Countries (OPEC)
- The Organization of the Petroleum Exporting Countries is an intergovernmental organization of 14 nations, founded in 1960 in Baghdad by the first five members (Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela), and headquartered since 1965 in Vienna, Austria.
- As of 2018, the 14 member countries accounted for an estimated 44 percent of global oil production and almost 82% of the world’s “proven” oil reserves, giving OPEC a major influence on global oil prices that were previously determined by the so-called “Seven Sisters” grouping of multinational oil companies.
- The stated mission of the organization is to “coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets, in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.”
What is OPEC+?
- OPEC + countries are non-OPEC countries that export crude oil alongside the 14 OPEC countries.
- Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan, and Sudan are among the OPEC plus countries.
What are their goals?
- The OPEC and non OPEC producers first formed the alliance at a historic meeting in Algiers in 2016.
- The aim was to undertake production restrictions to help resuscitate a flailing market.
Why are they slashing production?
- Oil prices skyrocketed after Russia’s invasion of Ukraine in February, and have since begun to soften over the past few months, before dropping sharply to under $90 in September due to fears of a recession in Europe and reduced demands from China because of its lockdown measures.
- Recent reduction is the biggest of its kind since 2020 when OPEC+ members slashed outputs by 10 million bpd during the Covid-19 pandemic, Reuters reported.
- The reductions would boost prices and be extremely beneficial for the Middle Eastern member states, to whom Europe has turned for oil after levelling sanctions against Russia since it invaded Ukraine.
- OPEC+ members are concerned that a faltering global economy would reduce the demand for oil, and the cuts are seen as a way to protect profits.
- Increased oil prices, which first occurred during the invasion of Ukraine, have helped Saudi Arabia, one of the founding members of OPEC, become one of the world’s fastest-growing economies
-Source: Indian Express