• OPEC+ has reached a deal on output policy after talks at its headquarters in Vienna on June 4 and agreed to extend earlier cuts in supply through the end of 2024 by a further total of 1.4 million barrels per day (bpd).

• Saudi Arabia will make a deep cut to its output in July on top of a broader OPEC+ deal to limit supply into 2024 as the group seeks to boost flagging oil prices.

• Saudi’s energy ministry said the country’s output would drop to 9 million bpd in July from around 10 million bpd in May, the biggest reduction in years.

• Oil producers are grappling with falling prices and high market volatility amid the Russian invasion of Ukraine, which has upended economies worldwide.

• In April, countries were caught off guard when several OPEC+ members agreed to voluntarily cut production by more than one million bpd, which briefly buttressed prices but failed to bring about lasting recovery.

• Oil prices have plummeted by about 10 per cent since the April cuts were announced, with Brent crude falling close to $70 a barrel, a level it has not traded below since December 2021.

• Traders worry that demand will slump, with concerns about the health of the global economy as the United States battles inflation with higher interest rates and China's post-COVID rebound stutters.

• OPEC+ has in place cuts of 3.66 million bpd, amounting to 3.6 per cent of global demand, including 2 million bpd agreed last year and voluntary cuts of 1.66 million bpd agreed in April.

• Those cuts were valid until the end of 2023. On June 4, OPEC+, in a broader deal on output policy agreed after seven hours of talks, said it would extend them until the end of 2024.

• The next meeting of the group is scheduled for November 26.

OPEC

• The Organisation of the Petroleum Exporting Countries (OPEC) is a permanent, inter-governmental organisation, created at the Baghdad Conference in September 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. 

• OPEC’s formation occurred at a time of transition in the international economic and political landscape, with extensive decolonisation and the birth of many new independent countries in the developing world. 

• The international oil market was dominated by the “Seven Sisters” multinational companies and was largely separate from that of the former Soviet Union and other centrally planned economies. 

• OPEC developed its collective vision, set up its objectives and established its Secretariat. It adopted a ‘Declaratory Statement of Petroleum Policy in Member Countries’ in 1968, which emphasised the inalienable right of all countries to exercise permanent sovereignty over their natural resources in the interest of their national development. 

• The statute stipulates that “any country with a substantial net export of crude petroleum, which has fundamentally similar interests to those of the member countries, may become a full member, if accepted by a majority of three-fourths of full members, including the concurring votes of all founder members”.

• Currently, the organisation has a total of 13 member countries. They are: Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, UAE, Venezuela

• OPEC had its headquarters in Geneva in the first five years of its existence. This was moved to Vienna in Austria on September 1, 1965.

OPEC’s objectives are to coordinate and unify petroleum policies among member countries, in order to: 

i) Secure fair and stable prices for petroleum producers.

ii) Ensure an efficient, economic and regular supply of petroleum to consuming nations. 

iii) Secure a fair return on capital to those investing in the industry.

• OPEC produced an estimated 32.2 million bpd of crude oil in 2022, which was 40 per cent of total world oil production that year. The largest producer and most influential member of OPEC is Saudi Arabia, which was the world’s second-largest oil producer in 2022, after the United States.

What is OPEC+?

• OPEC+ is a group of oil-producing nations, made up of the 13 members of the OPEC, and 10 other non-OPEC members. 

• The non-OPEC members are: Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, South Sudan.

• The OPEC bloc is nominally led by Saudi Arabia, the group’s largest oil producer, while Russia is the biggest player among the non-OPEC countries.

• The format was born in 2017 with a deal to coordinate oil production among the countries in a bid to stabilise prices. Since then, the group has reached deals for members to voluntarily cut and ramp-up production in response to changes in global oil prices.

• The OPEC and OPEC+ countries combined produce about 60 per cent of global oil production.

Manorama Yearbook app is now available on Google Play Store and iOS App Store