Oil Producing Nations Agree Deal To Control The Oil Prices
This agreement came after crude prices reached two-and-half-year highs during the pandemic
On 18th July 2021, it was reported that the OPEC cartel and its supporting nations like Russia have agreed a deal to boost the oil production from August to control the prices of the crude. This agreement came after crude prices reached two-and-half-year highs during the pandemic.
The move is expected to impact the petrol prices around the world, which have also gone up in the last two-and-half-year due to pandemic.
Last year, the OPEC and its supporting nations cut the crude production by a record 10 million barrels per day (bpd) as demand slumped and prices came crumbling down due to pandemic. This year, the price of Brent Crude Oil is up 43% to almost USD 74 a barrel.
The surge in the crude prices is due to the reopening of the economies around the world, contributing towards the rising inflation in some countries and threatening to put the breaks on the recovery of the global economy. With inflation rising, the oil producers were looking to ease the cuts in crude production, however, a row between the UAE (United States of Emirates) and Saudi Arabia earlier this month, threatened to derail the plans.
Earlier this month, the UAE blocked a proposal by Saudi Arabia and Russia to extend output curbs to 2022 after they rejected its demand to produce more oil. The unexpected public dispute between some of the major oil producing nations and prominent members of the OPEC, raised questions over the stability of the “OPEC +”, which controls more than 50% of the oil supplies in the world.
As part of the new deal, all OPEC members have agreed to increase the crude oil production by 2 million barrels per day starting from August till December 2021 to stabilise the global market. For several other members including the UAE, Saudi Arabia, Russia, Kuwait, and Iraq, the higher production quota have been agreed from May 2022.
Russian Deputy Prime Minister Alexander Novak commented on the deal and said, “The pandemic is not yet overcome, but we are seeing that thanks to vaccination all over the world, demand for our production is recovering as is the use of cars and air planes. It is therefore very important for us to fulfil our responsibilities and allow a recovery of the world economy."
The OPEC said it would phase out by September 2022 oil production cuts that were brought in last year.
