NEW DELHI: The crude price in the international market on Monday jumped by $1.86 a barrel or 2.44% as Saudi Arabia announced a cut in its oil production. Brent Crude price was trading at $77.86 a barrel while US West Texas Intermediate was trading at 73.53 a barrel at 6.50 pm IST. Saudi Arabia, top oil producer, announced that its output would drop to 9 million barrels per day (bpd) in July 2023 from around 10 million bpd in May 2023. The cut is Saudi Arabia’s biggest in years.
This comes after Opec (the Organization of the Oil Exporting Countries), which produces nearly 30% of the world’s crude oil, decided to reduce the production of crude by 1.16 million barrels per day from May 2023 until the end of the year. Russia too said it would curtail a million barrels per day until the end of the year.
“While production volumes have been cut, crude oil prices have been under pressure owing to weaker than expected demand from China and recessionary trends in several Western economies,” said Prashant Vasisht, Vice President and Co-Head, Corporate Ratings, ICRA Limited.
He further said in case crude oil prices increase upstream companies like ONGC would benefit from higher realisations and cash accruals on crude oil sales. However the marketing profits from oil marketing companies would decline or turn to losses depending upon the extent of rise.
Meanwhile, in India the decision to cut production by Saudi Arabia is not going to impact much on its domestic fuel price. Petrol and diesel prices have been on a freeze for a record 14 months now. Prices were last changed in May 2022, when the government cut excise duty to give relief to consumers.