The grouping of the world’s largest oil-producing countries, the OPEC and its allies, together known as OPEC+, decided to cut oil production by 2 million barrels per day (bpd).
- Opec’s de-facto leader Saudi Arabia said the cut of 2 million barrels per day (bpd) of output — equal to 2% of global supply — was necessary to respond to rising interest rates in the West and a weaker global economy.
- It is the biggest cut since the height of the Covid pandemic in 2020. The move would reinforce the perception that Russia and Saudi Arabia are working closely together to manage oil markets.
What is OPEC+?
- Established in 1960 by founding members Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, OPEC has since expanded and now has 13 member states. With the addition of another 11 allied major oil-producing countries that include Russia, the grouping is known as OPEC+.
- Previously controlled by western-dominated multinational oil companies known as the “Seven Sisters,” OPEC sought to give the oil-producing nations greater influence over the global petroleum market.
- They account for roughly 40 per cent of the world’s crude oil and 80 per cent of the globe’s oil reserves, according to estimates from 2018. They usually meet every month to determine how much oil the member states will produce.
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.
- 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.
Source : Indian Express