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Why in News?
- Saudi Arabia, the world’s top oil exporter, plans to raise its crude oil production significantly above 10 million barrels per day (BPD) in April, after the collapse of the OPEC+ supply cut agreement with Russia.
What’s the issue?
- A three-year pact between OPEC and Russia ended in acrimony recently after Moscow refused to support deeper oil cuts to cope with the outbreak of the coronavirus and OPEC responded by removing all limits on its own production.
- Oil prices plunged 10% as the development revived fears of a 2014 price crash when Saudi Arabia and Russia fought for market share with U.S. shale oil producers, which have never participated in output-limiting pacts.
- Effects now could quickly flood global markets at a time when the demand has already weakened substantially.
What is OPEC+?
- OPEC+ refers to the alliance of crude producers, who have been undertaking corrections in supply in the oil markets since 2017.
- OPEC plus countries include Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan, and Sudan.
What are their goals?
- The Opec and non-Opec producers first allied at a historic meeting in Algiers in 2016.
- The aim was to undertake production restrictions to help resuscitate a flailing market.
What is 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 the Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. They were to become the Founder Members of the Organization.
- It is a permanent, intergovernmental organization.
- Currently, the Organization has a total of 14 Member Countries.
- OPEC’s objective is to coordinate and unify petroleum policies among Member Countries, to secure fair and stable prices for petroleum producers; an efficient, economic, and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.
- It is headquartered in Vienna, Austria.
- OPEC membership is open to any country that is a substantial exporter of oil and which shares the ideals of the organization.
Why is OPEC+ more influential than OPEC?
- OPEC’s 14 members control 35 percent of global oil supplies and 82 percent of proven reserves. With the addition of the 10 Non-OPEC nations, notable among them Russia, Mexico and Kazakhstan, those shares increase to 55 percent and 90 percent respectively. This affords OPEC+ a level of influence over the world economy never seen before.