2020 is a special year for OPEC, expanding to Organisation of Petroleum Exporting Countries, an elite group of 14 countries that control the oil trade across the entire globe. It marks the 60th anniversary of the foundation of this club in 1960 with five countries namely Republic of Iran, Kuwait, Iraq, Saudi Arabia and Venezuela, in the city of Baghdad. But this is not why the future generations will remember this year as significant for the club.

OPEC and its oil producing allies finalized a historic agreement to cut production by 9.7 million barrels per day, following days of discussions among the world’s largest energy producers.The cut agreed to by OPEC members and Russia amounts to about 23 percent of their own production, and 10 percent of normal worldwide production.

OPEC+ Meeting

Today OPEC consists of 10 more countries bringing the total tally to 24. This includes Russia and Mexico. This is now popularly referred to as OPEC+ or the Vienna group. OPEC+ now controls 55% of the global oil supplies and 90% of proven oil reserves.

A sharp decline in oil demand has been seen all over the globe due to the ongoing economic recession caused due to the spread of Coronavirus. As major factories and plants shut down, the price of oil fell further due to the excess availability of oil resulting in losses for oil exporting countries.

Getting Deep into the deal

Since the beginning of March, Saudi Arabia and Russia were in a deadlock over the deal. The New York Times reported about the discussions between Trump and Russia as well as Saudi. He said it was in the interest of all oil-producing countries, including the United States, to rein in production.

Moscow had initially refused to go along with Riyadh’s demand to trim production. Had the current deal not come up at the right time, the market would have been swamped with oil. However, this won’t be effective till May, leaving enough time more oil to swamp up the market.

Even though the U.S. oil industry is yet to coordinate with OPEC and Russia with the cut in production, several oil dealers have already done so keeping in mind the demand.

Mexico too was unwilling to trim its production by a million barrels. However, after a deal with the United States whose terms are still unclear, it agreed to cut its production.

Under OPEC+’s new agreement, Mexico will cut 100,000 bpd instead of the 400,000 it had initially been asked to cut.

Financial Times in a conversation with Derek Browser talked about how importer countries would tend to gain from this. Anyone would love cheap oil. However, even the consumer demand is low. Therefore, this won’t last for long, once things start going back to normal.


SOURCE: OILPRICE.COM as on 18th April 2020

OPEC and India Relations

India is one the largest consumers of oil from OPEC and also one of the fastest growing economies. OPEC+ historic meeting had a big role of India as well. Already since the 2000, India’s energy demand has more than doubled, from 4% of the global total to over 7% of the current global total.

According to the International Energy Agency India’s primary energy demand will double by 2040.

Opec+ meeting
Credits: OPEC

Mohammad Sanusi Barkindo, OPEC Secretary General; HE Dharmendra Pradhan, India’s Minister of Petroleum and Natural Gas; and Mr. Daniel Yergin, Vice Chairman, IHS Markit, and Chairman of CERAWeek

OPEC anticipates, in fact, that by 2040India’s oil demand will increase by more than 150% to 10.1 mb/d from around 4 mb/d currently.

Once the production cut was announced, India made a case for affordable oil prices at the G20 energy meeting. OPEC accounts for nearly 80% of India’s imports, so this decision will have an impact on the Indian market, even if it is short lived. India is a major refining hub in Asia; therefore, the current oil price drop has resulted in its favour enabling the opportunity to act upon the highly ambitious and costly Indian Strategic Petroleum Reserves (ISPR) programme.

union minister for petroleum and natural gas - Dharmendra Pradhan Opec meeting

Union Minister for Petroleum & Natural Gas Dharmendra Pradhan in his statement at the G20 energy meeting, held at the backdrop of the OPEC meeting advocated for a consumption-led-demand recovery as well as reasonable pricing. He called for a solution to ensure that the interests of both, the producers as well as the consumers are kept in mind.

U.S. Energy Secretary Dan Brouillette reiterated, “Today’s crisis transcends the interests of any one nation and requires a swift and decisive response from us all. Failure to act has far reaching consequences to each of our economies,” at the G-20 meeting.

Current Scenarios after the OPEC+ meeting

At the current moment, even though there is a sharp decline in demand for petroleum as less vehicles and factories operate; there is a surge in demand for natural gas as most of the people are locked in their houses. Thereby keeping the refineries alive.

In the historic OPEC+ meeting, Mr. Pradhan reassured the grouping that India will continue to remain a global energy demand centre. Indirectly, stressing upon the fact, to keep India’s needs in mind when oil production and prices are concerned.

India currently holds its strategic oil reserves in Vishakhapatnam, Mangaluru and Padur, storing 5.33 million tonnes of crude, which could last for around nine days. He told the group that India will keep on filling up its strategic petroleum reserves.


crude oil imports and OPEC+

Iran is one of the largest exporters of crude oil to India. It is lagging behind only Iraq and Saudi Arabia, with exports totalled more than 27 million tonnes last year. This makes India the second-largest buyer after China from Iran. This has resulted in a lot of controversies with the United States. This pushed for sanctions in 2019 for countries involved in oil trade with Iran. However, succumbing to pressure, India agreed to decrease imports from Iran by 25%. This was consequence of the historic Opec+ meeting

However, reducing anymore is not possible due to the intense level of agreements between both countries. India has also committed itself to invest $500 million to build berths at Chabahar’s Shahid Beheshti Port. Also, $2 billion to build a rail line through the Zahedan province to Afghanistan. This is done in an effort to circumvent trade restrictions by Pakistan. Iran’s other oil importers, China and Turkey, have said they will not accept the U.S.’s diktat.


The coronavirus has till now shown no signs of slowing down, and the vaccine won’t be ready before the advent of 2020. So, investors still have fear after historic opec+ meeting. Oil prices fell by 10% more after the cut announced. As investors debated their respective courses of action. The United States policymakers are under immense pressure to tackle the price war brought on by Russia who think that the president could have acted more aggressively. The current crisis threatens a lot of jobs and with the spike in cases in the US, the market will be worst affected.

Russia depends highly on its oil exports for revenue and thus, this year, its budget will be severely affected. Countries in Latin America have however shown little response to COVID-19 as the number of cases there is not as much as compared to countries in Europe and North America. Therefore, they are showing hesitation in cutting back their productions.  For the Asian Premium, which is largely a consumer these are ripe times to hoard on their oil stocks.