• The Organisation of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) announced that they will proceed with a planned increase in oil output in April 2025. 

• This marks the first production increase since 2022 and comes amid pressure from former US President Donald Trump to lower oil prices.

Decisions during the meeting:

• OPEC+ members met virtually and agreed to increase production by 138,000 barrels per day (bpd) in April.

• This decision aligns with their plan to gradually unwind cuts of 2.2 million bpd.

• The increment is flexible, meaning OPEC+ may pause or reverse it depending on market conditions to maintain oil price stability.

Oil Price Trends

• Oil prices fell 2 per cent to around $71 per barrel following the announcement.

• Recently, oil prices fluctuated between $70-$82 per barrel due to:

a) US sanctions on major oil producers (Iran, Russia, and Venezuela).

b) Potential US tariffs on China, which may impact global demand.

US Pressure & Global Factors 

• Trump has renewed pressure on OPEC+ and Saudi Arabia to lower oil prices.

• Factors contributing to the complex decision-making process include:

a) Speculation that Trump may broker a peace deal in the Russia-Ukraine war, which could increase Russian oil supply.

b) His plans to cut Iran’s oil exports to zero, limiting supply.

c) Concerns over global tariffs and their potential impact on oil demand.

What is OPEC?

• Crude oil production by the Organisation of the Petroleum Exporting Countries (OPEC) is an important factor that affects oil prices. This organisation seeks to actively manage oil production in its member countries by setting production targets. Historically, crude oil prices have seen increases in times when OPEC production targets are reduced.

• OPEC member countries produce about 40 per cent of the world’s crude oil. Equally important to global prices, OPEC’s oil exports represent about 60 per cent of the total petroleum traded internationally. 

• Because of this market share, OPEC’s actions can, and do, influence international oil prices. In particular, indications of changes in crude oil production from Saudi Arabia, OPEC’s largest producer, frequently affect oil prices.

Origin of OPEC

• The 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 12 member countries. They are: Algeria, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, UAE and 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 regularly meets to set oil production targets and coordinate output to help manage global oil prices for the entire group.

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.

What is OPEC+?

• OPEC+ is a group of oil-producing nations, made up of the 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.

(The author is a trainer for Civil Services aspirants.)