OPEC’s Oil Output Cut

Why in news?

Recently, the OPEC decided to cut the oil production due to low demand and to stabilize the oil markets.

What is OPEC?

• Organization of Petroleum Exporting Countries (OPEC) is a permanent intergovernmental organization of 13 oil-exporting developing nations.
• Mission -To coordinate and unify the petroleum policies of its Member Countries ensuring the stabilization of oil markets in order to ensure regular supply of petroleum to consumers.
• OPEC Secretariat -Is the executive organ of OPEC.
• Headquarters -Vienna, Austria.
• Significance -OPEC
  • Hold more than 80% of the world’s proven oil reserves
  • Produces about 40% of the world’s crude oil
  • Exports make up around 60% of global petroleum trade
• OPEC+ -It is a loosely affiliated entity consisting of the 13 OPEC members and 10 of the world’s major non-OPEC oil-exporting nations.
• It includes Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan in addition to OPEC members.
• Since 2016, they cooperate in fixing the global crude oil prices.

What are the impacts of the oil cut?

Global impacts

• The global benchmark Brent rose by more than 5%
• Inflationary pressures on the global economy
• Fluctuations in global assets
• The oil producing nations other than OPEC have also reduced the oil production
• The oil market might move into a deficit

The Brent benchmark is used to price over three-quarters of the world's traded oil as one of the most liquid crude grades. It is processed by refiners around the world.

Impact on India

• • Higher oil import bills and this could lead to inflation
  • Current account deficit will increase
  • Weaken Indian rupee
  • May decrease global  investment in India especially USA
  • Complex for the monetary policy committee to fix the basis points

References

1. The Business Line│OPEC Oil Production Cut Down
2. The Economic Times│Impacts Of Oil Production Cut Down
3. OPEC│About OPEC