Context
Oil prices rose about 1%, as OPEC+ members agreed to its deepest cuts to output since the 2020 COVID pandemic, despite a tight market and opposition to cuts from the United States and others.
How Much Cut Has Been Proposed?
- The 2 million-barrel-per-day (bpd) cut from OPEC+ could spur a recovery in oil prices that have dropped to about $90 from $120 three months ago on fears of a global economic recession, rising U.S. interest rates and a stronger dollar.
- U.S. West Texas Intermediate (WTI) crude rose $1.24, or 1.4%, to settle at $87.76 a barrel.
- It reached $88.42 per barrel during the session, the highest since Sept. 15.
- Both Brent and WTI rose sharply in the last two days.
About OPEC
- Established in 1960.
- OPEC is a permanent, intergovernmental organization.
- Founding members: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.
- Other Members: The UAE, Algeria, Angola, Equatorial Guinea, Gabon, Libya, Nigeria, and the Republic of the Congo.
- Headquarter - Vienna (Austria).
- The 13 member countries accounted for an estimated 44 percent of global oil production and 81.5 percent of the world's proven oil reserves.
- OPEC membership is open to any country that is a substantial exporter of oil and which shares the ideals of the organization.
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What is OPEC+?
- The non-OPEC countries which export crude oil along with the 14 OPECs are termed as OPEC plus countries.
- OPEC Plus was created in 2016 when OPEC countries decided to ally with other oil-producing countries outside the group to cut down the global output of oil.
- OPEC plus countries include Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan, and Sudan.
- Saudi and Russia, both have been at the heart of a three-year alliance of oil producers known as OPEC Plus — which now includes 11 OPEC members and 10 non-OPEC nations — that aims to shore up oil prices with production cuts.
- It accounts for an estimated 44 percent of global oil production and 81.5 percent of the world’s “proven” oil reserves.
- ??Objectives
- Coordinate and unify petroleum policies among Member Countries
- In order to secure fair and stable prices for petroleum producers
- The efficient, economic and regular supply of petroleum to consuming nations
- A fair return on capital to those investing in the industry
Concerns for India
- Rising prices: Even after importing cheap Russian oil, India has not seen any cut in fuel prices. Rising oil prices are posing fiscal challenges for India, where heavily-taxed retail fuel prices have touched record highs, threatening the demand-driven recovery.
- Threatened recovery: As one of the largest crude-consuming countries, India is concerned that such actions by producing countries have the potential to undermine consumption-led recovery.
