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Opec: What is it and what is happening to oil prices? Opec: What is it and what is happening to oil prices?
(2 months later)
Russia produces more than 10 million barrels of oil a dayRussia produces more than 10 million barrels of oil a day
Several of the world's largest oil exporters have said they are cutting their production levels, which has caused a leap in crude prices. Saudi Arabia has announced it will be cutting its production of crude oil by a million barrels a day to try to boost prices.
Saudi Arabia, Iraq and several Gulf states are together cutting supplies by one million barrels of oil a day and Russia, their fellow member in the Opec+ group, is extending its cut of half a million barrels per day until the end of the year. Other members of the oil producers' group Opec+ agreed to keep their output levels unchanged, having made cuts of more than one million barrels a day last April.
The move has ben criticised by the White House. Oil analysts do not expect the most recent cut to cause a big rise in world crude prices.
What is Opec+?What is Opec+?
Opec+ is a group of 23 oil-exporting countries which meets regularly to decide how much crude oil to sell on the world market.Opec+ is a group of 23 oil-exporting countries which meets regularly to decide how much crude oil to sell on the world market.
At the core of this group are the 13 members of Opec (the Organization of the Oil Exporting Countries), which are mainly Middle Eastern and African countries. Opec was formed in 1960 as a cartel, with the aim of fixing the worldwide supply of oil and its price. At the core of this group are the 13 members of Opec (Organization of the Petroleum Exporting Countries), which are mainly Middle Eastern and African nations. Opec was formed in 1960 as a cartel, which aimed to fix the worldwide supply of oil and its price.
Today, Opec nations produce around 30% of the world's crude oil. Saudi Arabia is the biggest single oil producer within Opec, producing more than 10 million barrels a day. Opec nations produce about 30% of the world's crude oil. Saudi Arabia is the biggest single oil supplier within the group, producing more than 10 million barrels a day.
In 2016, when oil prices were particularly low, Opec joined forces with 10 other oil producers to create Opec+.In 2016, when oil prices were particularly low, Opec joined forces with 10 other oil producers to create Opec+.
Those new members included Russia, which also produces over 10 million barrels a day. One of the members of the expanded group is Russia, which also produces more than 10 million barrels a day.
Together, these nations produce about 40% of all the world's crude oil. Together, Opec+ countries produce about 40% of all the world's crude oil.
"Opec+ tailors supply and demand to balance the market," says Kate Dourian of the Energy Institute. "They keep prices high by lowering supplies when the demand for oil slumps." "Opec+ tailors supply and demand to balance the market," says Kate Dourian, of the Energy Institute. "It keeps prices high by lowering supplies when the demand for oil slumps."
The organisation can also lower prices by putting more oil onto the market. The organisation can also lower prices by putting more oil into the market.
Why is Opec+ cutting oil output?Why is Opec+ cutting oil output?
The most recent cut, of 1.16 million barrels a day, follows a cut of two million barrels a day in October 2022. Saudi Arabia's voluntary cut of one million barrels a day comes into effect in July.
It immediately led to a 5% rise in the oil price on international exchanges. It follows a cut of 1.16 million barrels a day in April, which was voluntarily undertaken by eight members of Opec+, and a group-wide cut of two million barrels a day in October 2022.
"It came as a complete surprise," says Ms Dourian, "because Saudi Arabia had said recently that its production quotas would remain in place for the rest of the year. It is thought that Saudi Arabia, which is currently chairing Opec+, needs to have the price of Brent crude rising to $80 (£65) a barrel or more to cover its government spending and import bill.
"It may be a pre-emptive move by Opec+, because it feels world demand for oil won't be as robust as was previously forecast." In 2020, the price of crude oil crashed because of a lack of buyers, as countries went into lockdown. Opec+ had to boost prices by cutting production dramatically - by more than nine million barrels per day.
In 2020, the group cut production by more than nine million barrels per day in response to the pandemic. As countries went into lockdown, the price of crude oil crashed because of a lack of buyers. Following Russia's invasion of Ukraine, the price of Brent crude soared to more than $130 a barrel. However, by March 2023 it had fallen back to little above $70 a barrel - a 15-month low.
Following Russia's invasion of Ukraine, prices soared to over $130 a barrel but by March this year, they had fallen to 15-month lows, down to little above $70 a barrel. David Fyfe, of the oil industry research group Argus Media, says that the most recent production cut may force prices above the $80 a barrel mark, but says that they may not rise far beyond that because global demand for oil is weak.
Rising oil prices will probably push up petrol prices again in the UK and around the world, adding to cost-of-living pressures. "We are seeing a sharp slowdown in economic growth in developed countries, almost to the point of them going into recession," he says. "And we don't think the demand for oil in China will increase a great deal in the next few months. So the market will not be that tight in the second half of the year."
The US has called the latest move by Opec+ "inadvisable".
What's happening with Russian oil?What's happening with Russian oil?
Russia's Vladimir Putin and Opec's secretary general Mohammad BarkindoRussia's Vladimir Putin and Opec's secretary general Mohammad Barkindo
After Russia invaded Ukraine, EU countries stopped importing all Russian oil transported by sea and countries such as the US and UK stopped buying it altogether. After Russia invaded Ukraine, EU countries stopped importing Russian oil transported by sea, and countries such as the US and UK stopped buying it altogether.
Russia is now exporting more crude to India and China, which did not join the Western sanctions against Moscow. Russia is now exporting more crude to countries such as India and China, which are not imposing the Western sanctions against Moscow.
However, the G7 group of nations are keeping Russia's oil revenues low by imposing a price cap of $60 a barrel on oil that it exports. However, the G7 group of nations is trying to keep Russia's oil revenues low by imposing a price cap of $60 a barrel on the oil that it exports.
Can the world cope without Russian oil and gas?Can the world cope without Russian oil and gas?
Cheaper Russian oil is attracting new Asian marketsCheaper Russian oil is attracting new Asian markets
Related TopicsRelated Topics
Russia-Ukraine warRussia-Ukraine war
OpecOpec
United Arab EmiratesUnited Arab Emirates
OilOil
Saudi ArabiaSaudi Arabia
Oil & Gas industryOil & Gas industry