OPEC Meet

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