- Saudi Arabia has decided to reduce its supply of oil to the world economy.
- This unilateral step is intended to stabilise falling crude oil prices.
- Previous efforts to reduce supply by major oil-producing countries in the OPEC+ coalition did not result in the intended price increases.
What exactly is OPEC+?
- Non-OPEC countries that export crude oil alongside the 14 OPEC members are referred to as OPEC plus countries.
- Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan, and Sudan are among the OPEC+ countries.
- Saudi Arabia and Russia have been at the centre of a three-year alliance of oil producers known as OPEC Plus, which now includes 11 OPEC members and 10 non-OPEC nations, with the goal of supporting oil prices through production cuts.
OPEC+ Production Cuts: Why?
- Russian conflict: Following Russia’s invasion of Ukraine, oil prices skyrocketed.
- Previous significant cut: The most recent decrease is the largest since 2020, when OPEC+ members slashed output by 10 million barrels per day (bpd) during the Covid-19 epidemic.
- Middle Eastern countries benefit: The cuts are expected to raise prices, favouring Middle Eastern OPEC+ members who have become key oil suppliers to Europe since Russia was sanctioned.
India’s Concerns
- Fuel price increase: Despite receiving inexpensive Russian oil, India’s fuel prices have not decreased.
- Rising oil prices pose fiscal issues for India, where steeply taxed retail fuel prices have reached all-time highs, jeopardising the country’s demand-driven economic recovery.
- India imports approximately 84% of its oil and relies on West Asian countries for more than three-fifths of its oil needs.
- Potential impact on consumption-led recovery: As one of the world’s top crude-consuming countries, India is concerned that OPEC+ output cuts may weaken the country’s consumption-led economic recovery and harm price-sensitive consumers.
Source: https://www.npr.org/2023/06/04/1180056198/saudi-arabia-oil-opec#:~:text=Saudi%20Arabia%20cuts%20oil%20production%20again%20amid%20economic%20uncertainty%20OPEC%2B,1%20million%20barrels%20per%20day.