OPEC+ countries cutting crude oil production

(Mains GS 2 : Effect of Policies and Politics of Developed and Developing Countries on India’s interests, Indian Diaspora.)

Context:

• Recently, major oil-producing countries including Saudi Arabia, Iraq, the United Arab Emirates, as well as Russia, have announced cuts in oil production that will start in May and last until the end of 2023.

About OPEC+:

• The Organization of the Petroleum Exporting Countries (OPEC) was founded in Baghdad, Iraq, with the signing of an agreement in September 1960 by five countries namely Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. They were to become the Founder Members of the Organization.
• These countries were later joined by Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975), Angola (2007), Equatorial Guinea (2017) and Congo (2018).

• OPEC was formed in 1960 as a cartel, with the aim of fixing the worldwide supply of oil and its price.
• The OPEC+ countries include the 13 core members of OPEC and 10 other major oil producers which meet regularly to decide how much crude oil to sell on the world market.
• In 2016, when oil prices were particularly low, Opec joined forces with 10 other oil producers to create Opec+.
• Those new members included Russia, which also produces over 10 million barrels a day.
• Together, these nations produce about 40% of all the world's crude oil.

Supporting market stability:

• The Organization of the Petroleum Exporting Countries (OPEC), at its 48th meeting of the Joint Ministerial Monitoring Committee, acknowledged the crude oil production cuts announced by major oil-producing countries. 
• The decision to cut crude oil production was aimed at supporting market stability. 
• In February 2023, Russia announced it would cut crude oil production by half a million barrels a day after Western countries capped the price of its crude as a response to the war in Ukraine. 

Earlier advance economies move:

• The G-7 bloc of advanced economies announced a price cap of $60 per barrel for Russian crude oil in December 2022.
•  The G7 and all EU Member States have taken a decision that will hit Russia’s revenues even harder and reduce its ability to wage war in Ukraine.
• European Commission President Ursula von der Leyen had said that it will also help to stabilize global energy prices, benefitting countries across the world who are currently confronted with high oil prices.

Impact on India:

• According to the World Energy Outlook 2021 data, India ranks third in the world in crude oil imports after China and the U.S., while it ranks a distant 21 in crude oil production and 26 in natural gas production.
• The disparity in the two rankings shows the country’s increasing reliance on imports to meet its energy needs.
• India’s crude oil import from Russia touched new heights in February this year, reaching 1.6 million barrels per day and at the same time, supply from Iraq and Saudi Arabia touched a 16-month low.
• This was more than the combined imports from conventional suppliers like Iraq and Saudi Arabia. 
• Russia’s increased share in India’s crude oil import is a direct consequence of the fallout between Russia and western countries following its Ukraine invasion that began in February 2022.
• The U.S. and countries in Europe decided not to buy crude oil from Russia in a bid to isolate the country on an international scale. 
• The decision, however, provided India with an opportunity to buy Russian oil, reportedly at discounted rates.