July 14, 2024

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Oil: OPEC+, Russia and production cuts

Oil: OPEC+, Russia and production cuts

The decision of the most important exporters in the world, including Russia, leads to higher oil prices Production cut by 2 million barrels per day.

The cost of oil has fallen since June, when concerns about Russia’s invasion of Ukraine drove it up.

What is OPEC+?

OPEC+ is a group of 23 oil-exporting countries that meets regularly to determine how much crude oil to sell on the global market.

At the heart of this group are the 13 member countries of OPEC (Organization of Petroleum Exporting Countries), which are mainly Middle Eastern and African countries. OPEC was founded in 1960 as a cartel with the goal of determining the global supply and price of oil, according to BBC.

Today, OPEC countries produce about 30% of the world’s crude oil. Saudi Arabia is the largest oil producer within OPEC, producing more than 10 million barrels per day.

In 2016, when oil prices were particularly low, OPEC joined forces with 10 other oil producers to form OPEC+. These included new members Russiawhich also produces more than 10 million barrels per day.

Together, these countries They produce about 40% of the world’s total crude oil. The agency can also lower prices by putting more oil on the market.

Why is OPEC+ reducing oil production

In their first direct meeting since March 2020, OPEC+ members agreed to cut production from August 2022 levels by 2 million barrels per day to less than 42 million barrels.

cut that It will come into effect from NovemberIt represents about 2% of global oil supply and is larger than expected.

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It is the biggest cut OPEC+ has made since 2020, when it cut production by more than 9 million barrels per day in response to the coronavirus pandemic.

This move is designed To increase the cost of oil, which fell below $90 from a high of $122 in June. Prices went up after the announcement.

Rising oil prices have pushed up gasoline prices around the world and in turn helped fuel inflation.

The US had asked OPEC+ not to go ahead with the cuts, in part because lower prices mean less revenue for Russia. The White House accused the agency of “biasing” against Russia.

In July, US President Biden visited Saudi Arabia, the largest oil producer within OPEC +, to ask Crown Prince Mohammed bin Salman to increase oil production. to reject.

Why did oil prices rise?

In the spring of 2020, with Covid spreading around the world and countries going into lockdown, the price of crude oil collapsed due to a shortage of buyers.

Then, OPEC+ members agreed to cut production by 10 million barrels per day to help support the price.

Since then, the organization has slowly increased production while also increasing demand.

But when Russia invaded Ukraine, the price of crude oil soared to $100 a barrel. Markets were worried that global sanctions could lead to a shortage of Russian oil.

The price has since fallen, fueling speculation that OPEC+ will cut production, which it eventually did.

What’s up with Russian oil?

after, after Russian invasion of UkraineMany countries bought less Russian oil and its price began to fall.

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at some pointRussian crude was more than $30 a barrel cheaper than Brent crude, the international standard for petroleum. By the end of September, the barrel was about $20 cheaper.

India and China – which were not involved in Western sanctions against Russia – now account for more than half of the country’s seaborne oil exports.

Russia is now the largest supplier of oil to China, after it seized Saudi Arabia.

In March of this year, China and India import more oil from Russia than all 27 EU member states.

The European Union plans to ban Russian crude from December 5th. It will be applied to crude oil shipped by tanker and most pipeline supplies.

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