According to the OPEC's latest meeting, allied producers have agreed to lower production of crude oil by 1.2 million barrels per day for a six-month period. The measure was reportedly spearheaded by Russia and is expected to be come into effect starting New Year, that is January 1.
Efe news reported Iran's Oil Minister, Bijan Zanganeh making an announcement post a meeting between 24 oil producing countries. Zanganeh added that he was satisfied by the fact that Iran remained exempt from the commitment to reduce oil production.
The OPEC's latest decision is in stark contrast to assurances offered by Saudi's energy minister Khalid Al-Falih. On Thursday, news reports quoted the OPEC as "seriously considering" PM Modi's requests on lowering crude supplies. Al-Falih was quoted in an IANS story as saying that he had observed PM Modi addressing global leaders in Buenos Aires at the G20 summit.
"We would take the views of Prime Minister Modi's seriously. Privately, he made those points in Buenos Aires (during the G20 summit) to us (Saudi Arabia), that he cares for the Indian consumers. I have seen him several times at energy events in India, where he has been vocal about it," the minister added.
India, the world's third largest oil consumer, imports 80% of crude to meet its energy requirements. But it is not only India that is worried on rallying crude supplies. There has been an unrest among consumers in France and the US too.
US President Donald Trump had sought the OPEC to keep prices under check. Commenting on Trump's demand, Al-Khalih elaborated, "Trump is the President of the largest consuming country of petrol. Just like a consumer in the US or in France, India and Saudi Arabia, everyone wants affordable energy. So he has every right to wish for affordable energy for his citizens. We would hear him and take his views seriously."
However, when asked if the US's permissions could affect supplies, he said the OPEC does not need permissions. "We don't need permission from anyone to cut. They are not in a position [referring to the US] to tell us what to do," the minister told Al-Jazeera.
The OPEC accounts for over half of the world's oil output. The 15 member member cartel of oil-producing nations comprises Algeria, Angola, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Congo, Saudi Arabia, United Arab Emirates, Venezuela and Qatar. Of these, Qatar has wished to quit the cartel from January 2019 to focus on efforts to increase natural Gas production.
According to OPEC's Monthly report, total supplies of OPEC-15 is reported at 32.76 million barrels per day for the month of September 2018. In 2016, the daily production [cited by Statista] stood at 39.4 million bpd.
Crude rates in October skyrocketed to a four-year high of $86 per barrel. These have cooled to under $60 per barrel, [price on Friday quoting $59 per barrel].
India's imports have risen from 82.1% in the month of October FY18 (2017-18) to 83.5% for Oct FY19 (2018-19). The outgo on Gross petroleum products has increased from $8.9 billion to $13 billion around this corresponding period. Here is a snapshot of the data [Source: PPAC- Petroleum Planning and Analysis Cell of India].
PPAC's monthly report itself says that a price change of one $ per barrel results in import bill change of Rs 6,158 crores. And if the exchange rate rises a Rupee for every dollar, the crude oil import bill changes by Rs 6639 crores.
India's value of crude oil imports itself has increased in 2018 owing to volatility in crude oil prices and also the exchange rates.
OPEC's supply-cut is certain to boost Crude prices, but by what margin is still a guess.