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Source: Indian Express
Relevance – High global oil price contributes to increasing inflation level in India. Therefore, the decision of the OPEC+ meeting is important for India.
Synopsis: OPEC (Organisation of Petroleum Exporting Countries) and its allies led by Russia have agreed to gradually withdraw Covid-related production cuts by September 2022.
Background:
- OPEC and its allies led by Russia have agreed to gradually withdraw Covid-related production cuts by September 2022.
- OPEC+ will increase overall production by 4,00,000 barrels per day every month. It will go on till the remaining portion of the group’s 10 million barrels per day production cut announced in April 2020 is completely reversed.
- The decision also ends a standoff between the UAE and other OPEC+ countries on tying an extension of the supply agreement to increases in production.
Read more – OPEC’s output pact proposal: How will decision affect India?
Why this move?
- The OPEC+ group of countries entered into a two-year agreement in April 2020.
- It entailed steep cuts in crude oil production to deal with a sharp fall in the price of crude oil as a result of the Covid-19 pandemic.
- However, crude oil prices have recovered to above the pre-Covid-19 levels.
- The current price of Brent Crude is about 39 percent higher than the price of crude at the beginning of the year.
How OPEC+ deadlock was impacting India?
- India has already seen a 21.7 percent increase in the price of petrol and diesel since the beginning of the year. Petrol is currently retailing at Rs 101.8 per litre in the national capital and diesel is retailing at Rs 89.87 per litre.
- The price of Brent Crude had risen to over $77 per barrel earlier in July over a potential deadlock in OPEC+ negotiations on production levels.
- Furthermore, this announcement of an increase in production levels may not result in price reduction because of the increased mobility restrictions due to the pandemic.
