The International Energy Agency (IEA) noted that the extended oil output cuts by Saudi Arabia and Russia till the end of 2023 are likely to result in a significant market deficit in the fourth quarter.
The OPEC+ alliance, which includes OPEC and its allies, started implementing these restrictions in 2022 to support the market.
Recently, Brent crude prices exceeded $90 a barrel after Saudi Arabia and Russia prolonged their joint 1.3 million barrel per day (bpd) cuts.
Although OPEC+ curtailed its output by over 2.5 million bpd since the beginning of 2023, this has been counterbalanced by increased production from non-OPEC+ countries such as the US, Brazil, and Iran.
The IEA’s monthly oil report emphasized that starting from September, the reduced production from OPEC+ would lead to a substantial supply shortage for the rest of the year.
However, by the beginning of the subsequent year, the market might see a surplus, although stock levels might be precariously low, thereby heightening volatility risks in an already unstable economic setting.
Despite concerns over China’s slow post-pandemic economic recovery and potential high U.S. interest rates, global oil demand has been largely unaffected.
The IEA pointed out that any sudden downturn in China’s industrial and oil demand could have global repercussions, especially impacting emerging markets in Asia, Africa, and Latin America.
While predictions of global demand and supply vary among experts, both the IEA and OPEC remain positive about China’s demand in 2023, maintaining their global demand projections for the present and upcoming years.
