IEA: OPEC+ Production Cuts To Send Oil Prices And Volatility Surging
IEA: OPEC+ Production Cuts To Send Oil Prices And Volatility Surging | OilPrice.com
Oil prices are set for a surge in volatility amid an expected “significant supply shortfall” on the market in the fourth quarter of 2023, due to the Saudi-led cuts to OPEC+ oil supply, the International Energy Agency (IEA) said on Wednesday.
So far this year, higher crude oil production from countries outside the OPEC+ alliance has managed to offset part of the OPEC+ cuts.
“But from September onwards, the loss of OPEC+ production, led by Saudi Arabia, will drive a significant supply shortfall through the fourth quarter,” the IEA said today in its closely-watched Oil Market Report for September.
Last week, Saudi Arabia and Russia extended their production and export cuts of 1 million barrels per day (bpd) and 300,000 bpd, respectively, until the end of 2023, pushing Brent Crude prices to above $90 per barrel and the highest level in 10 months.
Oil prices traded in relative calm during August, with volatility at multi-year lows, the IEA said today. But a calm August was followed by the announcements of extensions of the supply cuts in early September, which sent prices and volatility higher.
Volatility could further increase through the end of this year, according to the agency.
If the two OPEC+ leaders unwind the cuts in early 2024, the market would shift to a surplus, the IEA said, but noted that oil stocks would still be at uncomfortably low levels. This increases “the risk of another surge in volatility that would be in the interest of neither producers nor consumers, given the fragile economic environment,” the Paris-based agency added.
“The Saudi-Russian alliance is proving a formidable challenge for oil markets,” it said, commenting on the move higher in oil prices and on its previous warnings about an already tightening oil market.
In August, observed global inventories plunged by a massive 76.3 million barrels, or by 2.46 million bpd, per the IEA estimates.
By Tsvetana Paraskova for Oilprice.com
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