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News: The OPEC+ group of oil producers celebrated their fifth birthday in early December.
They first came together to face the threat posed by the US shale boom back in 2016. However, their future wasn’t much easier.
The group was on the verge of collapse in 2020, but it was saved by the covid pandemic. The pandemic forced the need for a coordinated response to oil-supply management in the face of an unprecedented slump in demand.
They need to continue to stick together, as the world’s need for oil will require changes in their production limits.
What are the current challenges before the OPEC+ countries?
First, the disastrous effect of the Pandemic has not eased yet. Further, there is a concern over the emergence of another new Coronavirus variant.
Second, the producer group faces the return of oversupply and a growing need to cut output once again. At the same time, it faces pressure from consumer countries, worried by soaring inflation, to keep the supply open.
Third, several OPEC+ members are already unable to meet their output targets, and a few other producers including Russia rapidly approaching full capacity. The group is struggling to add the output it would need to balance the market.
Source: This post is based on the article “Opec+ should expect plenty of turbulence in the years ahead” published in Live Mint on 28th Dec 2021.
