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Supply curve

LiveMint logoLiveMint 22-05-2017 Livemint

Members of Organization of the Petroleum Exporting Countries (Opec) and other major oil producers will meet in Vienna later this week to discuss production cuts. Predictably, oil prices have gained in recent days. In November 2016, the oil cartel decided to cut production by 1.2 million barrels per day and was supported by other oil producers, including Russia, which decided to trim production by 600,000 barrels per day.

Most analysts expect that the production cuts will be extended, but it would be interesting to see if these producers are willing to do more to drain the global stockpile. According to the International Energy Agency, at the current level of production, the stockpile may not go down to the desired level by the end of 2017. Rising US shale output would further complicate matters for Opec. With deeper cuts in production, it is possible that Opec would lose market share without being able to influence the price as desired.

India benefits from lower oil prices as it helps contain inflation and current account deficit.

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