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India urges against more output cuts; Opec won’t let slump recur

Opec has said that it will do whatever is possible to ensure that stability in oil production is sustained. India is a key consumer and has urged Opec members to avoid output cuts. Oil prices have come down $10 per barrel from a month ago.

ET Bureau|
Oct 16, 2019, 09.24 AM IST
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Agencies
oil-agencies
A drone attack on a Saudi facility had briefly pushed prices above $70.
NEW DELHI: The Organisation of Petroleum Exporting Countries (Opec) vowed on Tuesday not to permit a relapse of the oil market downturn while key consumer India urged it to resist deepening production cut.

"We are determined not to allow a relapse of the downturn that we just navigated out of. We will do whatever is possible within the powers to ensure this relative stability is sustained beyond 2020," Opec secretary general Mohammad Sanusi Barkindo told an industry conference.

Oil prices were trading around $59 a barrel on Tuesday, down about $10 from a month ago when a drone attack on a Saudi facility had briefly pushed prices above $70. Prices have since mostly traded around $60 as Saudi production has returned to normal and concerns have risen about global economic growth and oil demand.

"What we believe is currently driving the market is more to do with the demand side of the equation, not the supply, " Barkindo said.

To support prices following a deep oil downturn in 2015-16, Opec members, Russia and a few other producers had agreed to cut production. Falling prices have ignited fears that Opec and allies may be induced to further cut output to support prices.

"We hope in the current geopolitical situation, Opec does not exercise greater production cuts. We sincerely believe crude prices should be left to market forces of demand and supply,” oil minister Dharmendra Pradhan said.

Barkindo has reassured that Opec will protect the interest of consumers like India, Pradhan said after meeting the Opec secretary general. Rising supplies from North America and many other regions are positively influencing global supplies and acting as counterweight to Opec's influence in the global oil market, Pradhan said.

The geopolitics was rapidly changing and a new normal in the oil market was emerging, Pradhan said, adding that the new order suited India.

US-China trade war and a general economic slowdown across major economies has begun to hurt global oil demand. Barkindo said the financial markets have taken a bearish view of the global economic growth and by extension the demand. That has made Opec more cautious in guiding demand growth for 2019 and 2020, Barkindo said.

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