OPEC starts output cuts, crude basket at $55 per barrel

Following the late November agreement between major oil producers to cut output as a response to the global supply glut that had been pushing down prices for nearly two years, India has hiked petrol prices thrice and diesel prices twice in December. In early December, oil producers outside the Organisation of the Petroleum Exporting Countries (OPEC), led by Russia, agreed to reduce output by 558,000 barrels per day (bpd). This came in the wake of the 13-nation OPEC cartel’s November 30 decision to cut output by 1.2 million bpd for six months effective from  January 1. This is the first time since 2001 that OPEC and some of its rivals had reached a deal to jointly reduce output to tackle the global oil glut. As a result, the Indian basket of crude oils gained more than $3 a barrel at $54.42 per barrel over the weekend of December 11-12, even as global prices surged to an 18-month high.

Oil prices had earlier fallen by more than 50 per cent in less than two years, from levels of over $120 a barrel. The Indian basket, comprising 73 percent sourgrade Dubai and Oman crudes, and the balance in sweet-grade Brent, closed trade on Thursday at $54.57 for a barrel of 159 litres. Following the increase to fuel prices effected from Monday, petrol per litre currently costs Rs 70.60 in Delhi, Rs 73.13 in Kolkata, Rs 76.91 in Mumbai and Rs 70.07 in Chennai. Similarly, diesel costs Rs 57.82 in Delhi, Rs 60.06 in Kolkata, Rs 63.61 in Mumbai and Rs 59.47 in Chennai. State-run oil marketers revise prices fortnightly and rates were previously hiked on December 16 - petrol by Rs 2.21 a litre, and diesel by Rs 1.79 paise, both in Delhi, with corresponding hikes in other states. As per latest OPEC data, its reference basket of 13 crude oils closed at $52.71 a barrel on Wednesday. 

As the world’s third-largest oil consumer, which imports over 80 per cent of its requirements, India is naturally concerned about producers cutting output. OPEC Secretary General Mohammed Sanusi Barkindo, who was here last month, was conveyed India’s  viewpoint by Petroleum Minister Dharmendra Pradhan that the interests of consuming countries should be kept in  mind when the cartel decides on issues of output cut and pricing.