Crude oil prices rose marginally in the week and touched $84 per barrel on May 28 as the Organisation of Petroleum Exporting Countries and its allies (OPEC+) are set to meet on June 2 for its output policy meeting.
The oil cartel was earlier set to meet in Vienna on June 1 to decide on supply cuts for the second half of 2024, but OPEC pushed it back by a day and the meeting will now be held online.
Moneycontrol takes a look at the expectations around the OPEC+ meeting and the impact on crude oil prices.
What is expected from the OPEC+ meeting?
The Saudi Arabia-led OPEC+ is expected to extend voluntary production cuts till the end of 2024 to support crude oil prices.
Countries which have agreed for voluntary supply cuts are likely to continue with the announced cuts for the rest of the year, according to a Reuters report.
OPEC and its allies have currently put in place a total production cut of around 6 million barrels per day (bpd). Of this, production cut of 3.66 million bpd is implemented till the end of 2024 while the voluntary cuts of 2.2 million bpd expire in June.
Why did crude oil prices rise this week?
Prices climbed to $84 per barrel in the beginning of the week, on the anticipation of extension of supply cuts, compared to the average of around $80- $82 per barrel the last week.
The upside in prices was also on account of the start of driving season in the US and a weaker dollar. Brent prices, however, settled at $81.86 per barrel on May 30 due to demand worries and expectations of high interest rates in the US.
How have crude oil prices moved in the year?
Crude oil prices have traded higher in the first three months of calendar year 2024, owing to geopolitical tensions in the Middle East and its implications on trade routes, and oil production cuts by supplying countries. Oil prices rose 16 percent in the first three months of 2024.
Prices touched $90 per barrel on April 12 after Iran launched attacks against Israel and they were anticipated to climb higher, if tensions soared in the Middle East. However, as the war in the Middle East has had very limited impact on the global crude oil market, prices cooled down thereafter.
Despite supply cuts by OPEC+, weaker demand has prevented crude oil prices to sustain at high levels for a longer duration in the year.
What would be the impact on India?
Higher oil prices in the international market has a direct impact on India as the country is import- dependent for more than 85 percent of its oil requirements. State-owned oil marketing companies (OMCs), which control retail fuel prices in the country, get impacted by higher crude oil prices.
Even though OMCs have been booking profits in recent quarters, elevated oil prices prevent them from slashing petrol and diesel prices.
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