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OPEC’s Oil Output Cut

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April 06, 2023

Why in news?

Recently, the OPEC decided to cut the oil production due to low demand and to stabilize the oil markets.

What is OPEC?

  • Organization of Petroleum Exporting Countries (OPEC) is a permanent intergovernmental organization of 13 oil-exporting developing nations.
  • Mission -To coordinate and unify the petroleum policies of its Member Countries ensuring the stabilization of oil markets in order to ensure regular supply of petroleum to consumers.
  • OPEC Secretariat -Is the executive organ of OPEC.
  • Headquarters -Vienna, Austria.
  • Significance -OPEC
    • Hold more than 80% of the world’s proven oil reserves
    • Produces about 40% of the world’s crude oil
    • Exports make up around 60% of global petroleum trade
  • OPEC+ -It is a loosely affiliated entity consisting of the 13 OPEC members and 10 of the world’s major non-OPEC oil-exporting nations.
  • It includes Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan in addition to OPEC members.
  • Since 2016, they cooperate in fixing the global crude oil prices.


What are the impacts of the oil cut?

Global impacts

  • The global benchmark Brent rose by more than 5%
  • Inflationary pressures on the global economy
  • Fluctuations in global assets
  • The oil producing nations other than OPEC have also reduced the oil production
  • The oil market might move into a deficit

The Brent benchmark is used to price over three-quarters of the world's traded oil as one of the most liquid crude grades. It is processed by refiners around the world.

Impact on India

    • Higher oil import bills and this could lead to inflation
    • Current account deficit will increase
    • Weaken Indian rupee
    • May decrease global  investment in India especially USA
    • Complex for the monetary policy committee to fix the basis points

Quick facts

  • India buys around 85% of its crude oil needs from overseas oil markets.
  • India's current account deficit in 2022 was 3.7%.



  1. The Business Line│OPEC Oil Production Cut Down
  2. The Economic Times│Impacts Of Oil Production Cut Down
  3. OPEC│About OPEC


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