petrol-diesel
OPEC+, a group of oil producing countries, is preparing to increase production once again. According to sources, an agreement can be reached to increase production by about 1.88 lakh barrels per day (bpd) for the month of June. This will be the third consecutive month when the group will announce increase in supply.
Although this decision seems big, its impact will be limited for now. The reason for this is the US-Iran war and the ongoing blockage in the Strait of Hormuz. Unless the movement of oil through this important sea route becomes normal, the benefits of additional production will not reach the market.
Seven countries like Saudi Arabia, Iraq, Kuwait, Algeria, Kazakhstan, Russia and Oman will participate in Sunday's meeting. Despite the recent exit of the United Arab Emirates from the group, OPEC+ is sticking to its strategy of increasing production.
The Iran war that started on February 28 and the closure of Hormuz has had a major impact on the oil supply of Gulf countries. Exports of big producing countries like Saudi Arabia, Iraq, Kuwait and UAE have been badly affected. Before the war, these countries had the capacity to increase production.
Due to supply disruptions, crude oil prices crossed $125 per barrel this week, which is the highest level in the last four years. Due to this, concerns like increasing inflation and shortage of jet fuel are coming to the fore across the world.
Oil experts say that even if Hormuz reopens, it may take several weeks or months for the supply to completely return to normal. Therefore, at present the decision to increase production is being considered more symbolic.
According to the previous report, the total production of OPEC+ countries decreased to 35.06 million barrels per day in March. In this, the biggest decline was recorded in Saudi Arabia and Iraq.
Overall, this step of OPEC+ is to signal to the market that the supply will be increased when the situation improves, but in the current situation its direct impact will not be visible yet.
