Why in news?
The Organization of the Petroleum Exporting Countries (OPEC) met recently in Vienna.
What was the mandate?
- OPEC members agreed in 2016 to a historic deal to cut output by 1.2 million barrels a day.
- This was to end a supply surplus, and raise the price of oil.
- Following this there was a dip in productions.
- It was further worsened by outages in countries such as Venezuela and Libya.
- The production cut contributed to the steep rise in oil prices.
- Emerging markets such as India have been affected by the rising cost of oil imports.
- The OPEC meet was thus aimed at arriving at an agreement to increase oil output.
What is the outcome of the meet?
- OPEC agreed to increase its daily output to address the problem of rising crude oil prices.
- Saudi Arabia announced that the cartel’s output would be increased by about a million barrels a day.
- However, the group's official statement did not mention any solid numbers.
- It said that the OPEC countries would strive to adjust production levels.
- There is thus lack of any clear commitment from OPEC to raise production.
- This suggests that the threat of a supply shock still continues.
What are the implications?
- Iran has been opposed to raising OPEC output as it would lower the prices.
- Iran is thus set to suffer a marginal loss as it lacks spare capacity to ramp up production.
- It works in favour of its rival, Saudi Arabia.
- The present deal could help the Saudis appease major oil consumers to some extent.
- Saudi can recover from the impact of lower prices by capturing market share.
- It is to be seen if all this politicking will bring a stable reduction in global oil prices.
Source: The Hindu
