How would OPEC production cut affect fuel prices?
Russia is also set to cut oil production by 300,000 barrels per day during the first six months of 2017. Russian Energy Minister Alexander Novak held told reporters in Moscow.
Bengaluru, Dec 1 The Organisation of the Petroleum Exporting Countries (OPEC) on Wednesday approved the first supply cuts in eight years. The aim is to ease record surplus and stabilise global markets.
Iranian Oil Minister Bijan Namdar Zanganeh in Vienna said that OPEC has agreed to reduce collective production to 32.5 million barrels a day. He also informed that OPEC will continue with producing 32.5 million barrels a day for six months starting 2017.
Negotiations:
Negotiations to cut down the supply was not easy for OPEC members as when the production cut was first proposed in Algeris in September, investors were worried if an accord could ever be signed.
Right till the agreement was done major obstacles were threatening the signing of the agreement. Tense negotiations for months resulted in three largest oil producing countries - Saudi Arabia, Iraq and Iran - resolving their differences and agreeing to share the burden of the production cuts.
Saudi
Arabia
had
in
the
past
asked
to
be
given
special
consideration
when
it
comes
to
production
cut
as
it
needed
funds
to
carry
on
offensive
against
Islamic
State.
Indonesia
had
asked
that
its
membership
be
suspended
and
it
didn't
want
to
be
party
to
the
production
cuts.
Indonesia
is
a
net
importer.
What plans OPEC has?
OPEC plans to hold talks with non-OPEC nations who produce oil and ask for production cut. Russia is also set to cut oil production by 300,000 barrels per day during the first six months of 2017. Russian Energy Minister Alexander Novak held told reporters in Moscow.
What to expect of the production cut?
The price rise is going to be natural outcome of the oil production cut by the OPEC countries. But how much the price rises will depend on two things. First being how well the OPEC nations comply with the agreement. Second being how much the US oil producers fill up the gap left by the OPEC production cut.
US oil producers are making merry since last two years thanks to higher oil prices and lower drilling costs. Many experts believe that OPEC would want oil price to be between $50 and $60 per barrel as any price above it would mean US oil producers will step up the production which would hurt the interests of OPEC.
About OPEC:
OPEC is a permanent, intergovernmental Organisation which aims to co-ordinate and unify petroleum policies among its member countries to secure fair and stable prices for petroleum producers.
OPEC also aims an efficient, economic and regular supply of petroleum to consumer nations. OPEC also aims at providing a fair return on capital to investors in the petroleum industry.
OPEC
originally
had
five
member
nations:
Iran,
Iraq,
Kuwait,
Saudi
Arabia
and
Venezuela.
Nine
other
nations
joined
OPEC
later.
The
countries
who
joined
OPEC
later
are:
Qatar,
Indonesia,
Libya,
United
Arab
Emirates,
Algeria,
Nigeria,
Ecuador,
Angola,
Gabon
OPEC
has
its
headquarters
in
Vienna,
Austria,
since
September
1,
1965.
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