Why did Saudi Arabia take a Big decision to cut Oil production?| Will Petrol and diesel prices increase again?

 

Why did Saudi Arabia take a Big decision to cut  Oil production?

Crude oil prices are falling, and the OPEC country is troubled by this fall in prices. Meanwhile, in the meeting of OPEC countries held on Sunday, Saudi Arabia has taken a shocking decision, which will give a big loss to India. Such a decision may put a full stop to the possibility of petrol diesel becoming cheaper in the country in the future.

Not only this, it is expected that oil marketing companies will not have to increase the price of fuel. Saudi Arabia has announced that it will cut its production by one million barrels per day to overcome falling oil prices. What is the full news and what will be its effect on India, let us know.

The meeting of OPEC Plus countries was held in Vienna on Sunday. After a discussion in this meeting which lasted for hours, Saudi Arabia decided to cut production by one million barrels daily from July. The rest of the OPEC Plus countries will cut production by the end of 2024 as the group seeks to make up for falling oil prices. 

Let us tell you, even before this, oil production has been cut twice by the OPEC Plus group countries. Regarding Saudi Arabia's unilateral move, Energy Minister Abdulaziz bin Salman Al said that the consensus reached in the meeting is commendable. He said that the new targets set for production are more transparent and fairer. 

He said there would be a cut of 1.4 million barrels per day in July, Which can also go ahead. The Energy Ministry further informed that the country's production will come down to 9 million barrels per day (bpd) in July from about 10 million bpd in May. This is the biggest reduction in many years. 

Energy Minister Abdul Aziz said the drop in oil prices has helped American drivers fill up their tanks more cheaply, and has given consumers around the world some respite from inflation. Saudi Arabia realized that a further cut was necessary. Uncertainty can be seen in fuel demand in the coming months. 

Economic Weakness is being seen in America and Europe. At the same time, even after giving relief from covid-19 restrictions, the demand from China has not been seen as expected. He said that he will do whatever is necessary to bring stability to the market. 

Let us tell you, OPEC Plus is an organization of the world's largest oil-producing countries. It includes 13 petroleum-exporting OPEC countries such as Saudi Arabia, Iran, Iraq, Kuwait, United Arab Emirates as well as Azerbaijan, Bahrain, Brunei, Malaysia, Russia, Oman, Mexico, and Sudan among many others.

All these countries together control the supply of crude oil in the world. Explain that OPEC Plus produces about 40% of the world's crude oil. And Saudi Arabia is the major producer in the OPEC oil cartel and one of the OPEC members that agreed to a cut of 1.66 million barrels per day in April, of which Saudi Arabia had a 5 Lakh share.

Following the announcement, oil prices peaked at the end of that month, but fell back down over the next few weeks. OPEC Plus announced in October that they would cut two million barrels per day a month before the US midterm elections. However, those cuts only slightly boosted oil prices.

Saudi Arabia is engaged in diversifying its economy. In such a situation, they do not want to depend on their earnings only on oil. Also, it needs high oil revenue to carry forward its development projects, due to which it is trying to raise prices by cutting oil production.

According to the IMF, Saudi Arabia needs oil prices to be around $81 a barrel to meet its capex, which has been trading at $75 to $77 a barrel for a long time. On the other hand, India is going to suffer a lot due to Saudi Arabia's decision to cut oil. India is the third largest oil importer in the world.

Even though at present, India has bought cheap oil from Russia, the oil of Saudi Arabia is also not less in the Indian oil market. In such a situation, the increase in the price of Brent crude oil is not good news for India. This will increase India's import bill and will blow the possibility of lowering the prices of petrol and diesel in India.

According to experts, if the price of crude oil crosses $80 per barrel in the international market, then it will be difficult for India to reduce fuel prices. At present, the decision of OPEC plus countries to suddenly reduce the production of crude oil is a danger bell for other countries including India and its effect may start appearing in the coming times.