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OPEC+ Decision to Curb Oil Supply

Posted on March 10, 2021 by admin1  56

In News –Most of the OPEC+ producers, led by the world’s top exporter Saudi Arabia decided to curb oil supplies till April.

About

  • OPEC and its allies, a group known as OPEC+, agreed not to increase oil supply till April as they await a more substantial recovery in demand amid the coronavirus pandemic.
  • After OPEC’s decision, crude oil prices rose to over $71 per barrel although the prices eased to $69.08 a barrel by 1027 GMT.
  • Saudi has also raised the selling price of its oil for Asia.
  • This year, Iraq has cut annual supply volumes while Kuwait has shortened the duration of contracts with Indian buyers to nine months.
    • Iraq and Saudi Arabia are the two biggest oil suppliers to India.

Implications on India

  • India, the world’s third-biggest oil importer and consumer stated that the decision by major producers to extend output cuts as prices move higher could threaten the consumption led-recovery in some countries.
    •  India imports about 84% of its overall crude needs with over 60% of that coming from Middle Eastern countries, which are typically cheaper than those from the West.
  • Rising oil prices are posing fiscal challenges for India, where heavily-taxed retail fuel prices have touched record highs in some parts of the country, threatening the demand-driven recovery.

Steps taken by India

  • India has asked state refiners to speed up the diversification of oil imports to gradually cut their dependence on the Middle East after the OPEC+ decision.
  • India, hit hard by the soaring oil prices, has urged producers to ease output cuts and help the global economic recovery.
  • One plan is to import oil from new producer Guyana.
  • The country’s top refiner Indian Oil Corporation (IOC) has also renewed its oil import contract with Russia.
  •  India hopes to resume Iranian oil imports this year.

About  OPEC

  • The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization, created at the Baghdad Conference on September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.
  • The OPEC Secretariat is the executive organ of the Organization of the Petroleum Exporting Countries (OPEC). Located in Vienna.
  • In 2016, OPEC allied with other top non-OPEC oil-exporting nations to form an even more powerful entity named OPEC+ or OPEC Plus.
    • OPEC+ came into existence, in part, to counteract other nations’ capacity to produce oil, which could limit OPEC’s ability to control supply and price.
  • Objectives –
    • To coordinate and unify the petroleum policies of its Member Countries .
    • To 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.

Source :TH


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