Mint Explainer: Why Opec+ is extending production cuts till June
Mint explains why the Opec+ has curbed output and the demand outlook for the world. Crude oil price (Brent) has stayed below $100 a barrel since August 2022, after the sharp rise in the early days of the Russian invasion of Ukraine. While it has largely held above $80, the price dipped to the low seventies a few times in the past year.
Significantly, prices have remained subdued despite tensions in West Asia, as the economic outlook is weak and demand is relatively muted. The decision to extend the cut in production for another quarter shows the oil cartel’s determination to keep prices above $80 a barrel. Most Opec nations and allies depend on revenues from oil to keep their economies running and to invest in further development of their countries.
This includes Saudi Arabia where its Crown Prince Mohammed bin Salman aims to transform his country into a high-tech hub and destination for global business and leisure, ahead of an era when fossil fuel will be replaced with cleaner sources of energy. The country would ideally like oil prices closer to $100 a barrel to fund these plans but that looks unlikely with the US as the largest producer and a leading exporter. The 12-member Opec includes African nations such as Nigeria, Algeria and Libya while the allies include another 10 countries such as Russia, Mexico and Kazakhstan.
Russia has also decided to cut production and exports over the next three months. Since it is one of the largest producers after the US and Saudi Arabia, and also one of the largest exporters, its decision might lead to some tightening of supply and firming up of prices. The International Energy Agency (IEA) said that the global oil demand growth is losing momentum and that the deceleration will
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