OPEC and Allies Consider More Oil Cuts, While IEA Predicts Extra Oil in 2024

GS Paper II International Relations

Context:

The Organization of the Petroleum Exporting Countries and allies (OPEC+) are likely to extend and may even deepen oil supply cuts into next year.

About International Energy Agency (IEA):

The IEA was created in 1974 to help coordinate a collective response to major disruptions in the supply of oil.
Headquarters: Paris, France.
India’s Membership: Although India is not a member country.
- India along with Brazil, South Africa, and China is an associate member of IEA.
The IEA is at the heart of global dialogue on energy, providing analysis, data, policy recommendations, and real-world solutions to help countries provide secure and sustainable energy for all.

The International Energy Agency (IEA) expects a surplus oil supply in 2024, even if OPEC+ nations extend their cuts into next year
Decline in Oil Price: Since late September 2023, oil prices have witnessed a nearly 20% decline with the recent drop sparked by a significant increase in US crude inventories and production remaining at historic highs.
OPEC+: Saudi Arabia, Russia and other members have pledged total oil output cuts of about 5 million barrels per day (bpd), or about 5% of daily global demand.

Oil Benchmarks: Distinctions of Brent Crude and West Texas Intermediate

Oil benchmarks describe where the commodity originates, which determines its use and allows investors to track the price of a specific oil type.
Brent Crude: It is the benchmark used for the light oil market in Europe, Africa, and the Middle East.
- Origin: Oil is produced near the sea, so transportation costs are significantly lower.
West Texas Intermediate: It is the benchmark for the U.S. light oil market and is sourced from U.S. oil fields.
- Origin: Oil is produced in landlocked areas, making transportation costs more difficult.
Both Brent Crude and WTI are light and sweet, making them ideal for refining into gasoline.

Founding Members: OPEC was formed in 1960 by Iraq, Iran, Kuwait, Saudi Arabia, and Venezuela.
Headquarters: OPEC had its headquarters in Geneva, Switzerland, in the first five years of its existence. This was moved to Vienna, Austria in 1965.
Objective: OPEC regularly meets to set oil production targets and coordinate output to help manage global oil prices for the entire group.
Members: Apart from founding members, other countries who joined OPEC include Algeria, Angola,Congo, Equatorial Guinea, Gabon, Libya, Nigeria, and United Arab Emirates.
OPEC+: In 2016, largely in response to falling oil prices driven by significant increases in U.S. shale oil output, OPEC signed an agreement with 10 other oil-producing countries (including Russia) to create OPEC+.