Oil supply cuts by Saudi Arabia and Russia will create a “significant supply shortfall” and threaten a renewed surge in price volatility, the International Energy Agency warned.
Global oil markets face a deficit of 1.2 million barrels a day during the second half of 2023 following last week’s announcements by the OPEC+ leaders that they’ll extend cutbacks to the end of the year, the agency said. It’s smaller than projected last month, as a result of historical changes to demand estimates, but still poses risks for consumers.
Even if the two producers were to relax their curbs in early 2024, oil inventories will be severely depleted, leaving prices vulnerable to shocks, the IEA said. Brent futures climbed to 10-month high above $92 a barrel on Tuesday.
“The market is really tightening in the second half of the year,” Toril Bosoni, the head of the IEA’s oil market division, said on Bloomberg TV on Wednesday. “Already in August we saw global oil inventories falling by a massive 75 million barrels, according to preliminary data.”
The Saudis and other OPEC+ nations regularly say their intervention is aimed at balancing markets, but the group’s own data released on Tuesday point to an even bigger supply hole in the coming quarter of more than 3 million barrels a day — the largest in at least a decade. The OPEC+ coalition has given little explanation for its current strategy.
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