OPEC’s output pact proposalDate: 07 July 2021 Tags: World Economy
The talks held between OPEC+ countries have failed to give any result after UAE stopped a conditional supply agreement in addition to output pact.
OPEC+ has been contemplating increasing production of crude oil as demand has increased. Certain countries are fearful of price fall.
The OPEC+ group had made two year deal to reduce crude oil production in response to fall in prices, owing to decrease in demand.
The price had reached an 18 year low of less than $20 per barrel. Several exchanges had sold crude oil for negative rates.
The deal had envisioned an initial cut of 22 million barrels per day from the pre-pandemic levels. This was about 22 percent of a total output.
The price has since increased after vaccination process rolled out. Now the price stands at about $76 per barrel. The increase in demand was the reason for the rise in prices.
UAE wanted the bloc to increase production from August, without specifying the exact numbers. It has also not agreed for extension of production limit deal.
UAE feels that the OPEC+ deal had put limits without considering its production capacity. The production levels suggested to it were unfair.
Effects on India
India was expecting that a suitable deal was reached between OPEC+ countries to increase daily production levels. Delay in reaching deal will further escalate the prices.
High crude prices have made petrol prices breach Rs 100 per litre mark in many states. It may further see inflation rate climb if prices don’t sober down.