NEW DELHI: IN what is sure to come as a relief to Indian fuel consumers, international crude oil prices fell sharply—over 2.5 per cent—on Monday after the oil exporters cartel OPEC+ decided to begin removing supply and production restrictions from next month.
The cartel had brought in these production cuts in order to stabilise oil prices after the pandemic destroyed a major portion of demand last year. Rising Covid-19 cases across India and other major oil consumers, and the renewed efforts to finalise a nuclear deal with Iran are also contributing to the price dip.
Saudi Energy Minister Prince Abdulaziz bin Salman had told reporters after the OPEC+ decision was announced that the group can still reverse course if required during its next meeting scheduled for April 28.
“OPEC+ tapering was more of a compromise” than a sign of confidence in the market’s recovery,” noted Vandana Hari, founder of Vanda Insights in Singapore. A rollover, she added, might have strained the cohesion in the alliance.
While the past few days have witnessed a softening in crude oil prices due to the steady rise in Covid-19 cases across the world, and the OPEC+ decision has accelerated the decline, analysts still believe that prices will trend largely upward in the medium and long-term since vaccination drives are expected to result in demand returning rapidly once the virus is brought under control.
Goldman Sachs, for instance, remains bullish, noting that much more output will likely be needed over this summer as economies crank their engines up to speed. The OPEC+’s decision to up production despite the surge in cases also indicates that the cartel expects demand to continue rising.