Central Idea

Saudi Arabia has decided to decrease its oil supply to the global economy.
This unilateral action aims to stabilize the declining crude oil prices.
Previous efforts by major oil-producing countries within the OPEC+ alliance to cut supply did not yield desired price increases.

What is OPEC+?

The non-OPEC countries which export crude oil along with the 14 OPECs are termed as OPEC plus countries.
OPEC plus countries include Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan, and Sudan.
Saudi and Russia, both have been at the heart of a three-year alliance of oil producers known as OPEC Plus — which now includes 11 OPEC members and 10 non-OPEC nations — that aims to shore up oil prices with production cuts.

Russian war: Oil prices rose significantly following Russia’s invasion of Ukraine.
Previous major cut: The recent production cut is the largest since 2020 when OPEC+ members reduced outputs by 10 million barrels per day (bpd) during the Covid-19 pandemic.
Benefit to Middle Eastern states: The cuts are expected to boost prices, benefiting Middle Eastern OPEC+ members who have become significant oil suppliers to Europe after sanctions were imposed on Russia.

Fuel price hike: Despite importing cheap Russian oil, India has not seen a decrease in fuel prices.
Fiscal challenges: Rising oil prices pose fiscal challenges for India, where heavily-taxed retail fuel prices have reached record highs, threatening the demand-driven economic recovery.
Reliance on West Asian supplies: India imports about 84% of its oil and depends on West Asian countries for over three-fifths of its oil demand.
Potential impact on consumption-led recovery: India, as one of the largest crude-consuming countries, is concerned that production cuts by OPEC+ nations could undermine the country’s consumption-led economic recovery and negatively affect price-sensitive consumers.

	Description
Founding	September 14, 1960
Member Countries	Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, United Arab Emirates, Venezuela
Goal	Coordinate and unify petroleum policies among member countries, ensure stability and predictability in oil markets, secure fair returns on investment for member countries’ petroleum resources
Production Quotas	Set production limits for member countries to manage oil supply and stabilize prices
Market Monitoring	Monitor global oil market conditions, supply, demand, inventories, and prices
OPEC Meetings	Regular meetings held every six months for member countries to discuss and negotiate oil production and pricing policies
Pricing Policy	Historically used the “OPEC basket” concept – a weighted average price of crude oil blends produced by member countries
Influence on Prices	OPEC’s decisions and actions can impact global oil prices by increasing or decreasing production levels
Diminished Influence	OPEC’s influence on oil prices has reduced due to factors like the rise of non-OPEC oil production, changes in global energy markets, and geopolitical developments
Non-OPEC Cooperation	OPEC cooperates with non-OPEC countries, notably through the “OPEC+” group, which includes Russia, to collectively manage oil supply levels and enhance market stability