Crude oil prices have seen an upward trend in the global market amid reports indicating that the OPEC+ alliance is on the brink of finalising an agreement to slash production by 2 million barrels per day.
The OPEC+ group is reportedly set to approve a substantial reduction in daily oil output, amounting to 1 million barrels, in addition to Saudi Arabia's anticipated extension of a voluntary cut of the same size. Bloomberg reported this agreement among members of the alliance, which is currently in principle and awaits a formal vote during the meeting.
In response to these developments, oil prices experienced a notable 1.4% increase, reaching $84.22 a barrel on Thursday, reflecting the market's anticipation of the OPEC+ discussions.
For a country like India, heavily reliant on oil imports accounting for over 80% of its requirements, any surge in oil prices significantly impacts the oil import bill and weakens the rupee due to increased demand for the US dollar to facilitate crude oil purchases.
Saudi Arabia, advocating for production cuts, has been concerned about the decline in oil prices from nearly $98 in late September. This drop has raised apprehensions linked to slower economic growth and heightened supply in the market.
Fears within the OPEC+ alliance have been compounded by forecasts, such as those by the International Energy Agency, predicting further declines in oil prices in 2024 due to a considerable deceleration in demand growth.
Since late 2022, Saudi Arabia, Russia, and other OPEC+ members have committed to substantial oil output reductions, totaling about 5 million barrels per day. This strategic approach has been adopted to bolster oil prices amidst market uncertainties.
The discussions within the OPEC+ alliance reflect a concerted effort to stabilise the oil market, with members prioritising coordinated production cuts as a means to support and elevate prices in the current global economic scenario.