The much speculated OPEC meeting at Vienna has reached a deal, claim sources. The members have concluded oil production levels, starting from July. A formal Press Conference from the OPEC is awaited though.
The aim set by the Organisation of Petroleum Exporting Countries(OPEC) is to restore 1 million barrels per day (bpd) to the market. However, industry insiders familiar with the cartel’s ways, claimed that the actual production will reach around two-thirds of the target set by Saudi Arabia.
The reason is that some of the OPEC countries might not be able to increase production in such a short time period. The actual increase is expected to be of nearly 6,00,000 to 8,00,000 barrels per day.
The organisation seems committed to relax it’s 18-month-old policy (adopted in December 2016) keeping nearly 1.8 million bpd out of the market, adopted to check the excess supply situation and prevent a fall in prices.
The total output from the 24 nations had fallen by almost 2.8 million, following the disruptions in production in Venezuela and elsewhere.
The decrease in production, decided upon by the OPEC and Russia, coupled with a bullish demand in the market, has led to record high global oil prices in the past few months.
The increased production from USA lately had kept the oil prices balanced to a certain extent.
However, an increased production from OPEC was needed and the pressure from powers like the USA and major consumers like India resulted in the OPEC countries rethinking their stance.
The increase in production is not as much as expected by global markets, however, is something to begin with.
The Organisation has not clarified how the production burden will be distributed amongst the members, given the disruptions in Venezuela and the US’s sanctions on Iran.
Greater responsibility seems to be approaching Saudi Arabia, UAE and Kuwait.
- The Saudi Arabia Energy Minister, Khalid al-Falih has warned the world to not expect an “immediate flood” of oil coming into the market.
The meeting was extremely crucial for India. India, in fact, talked about the “pain” high oil prices were causing and before the meeting began, made a plea to the organisation for “reasonable” pricing. Increased production is expected to reduce India’s trade deficit to some extent and retail prices will drop too, but not very soon.