What would be the impact of Opec’s cut of 2.2 million barrels a day?
There will be an impact, but this cut will bring down production by less than 3 per cent of the global production and besides there are other (non-OPEC) countries that can bridge that gap. The second aspect is tonne miles. Though production has come down, tonne miles (miles a tonne of oil is transported) are going up. This is because refining bases are no longer (as they were traditionally) in the ports of production (West Asia) or ports of consumption (Western world) but in third-party (India) countries. One of the reasons for the drop in consumption estimates was the spiralling cost of oil, but today it is at an economical price range, which will stimulate consumption. For example, in this quarter, freight rates on the Aframax (smaller crude oil carriers) are better than the average of last year whereas it should have come down due to the slowdown. Two reasons for this. One, the cost of capital has increased and also that people are worried about prices of oil falling. The same quant
