OPEC+ cuts to tighten oil market sharply in fourth quarter, says IEA

The extension of supply cuts by OPEC+ to the end of 2023 will lock in a substantial market deficit through the fourth quarter, the International Energy Agency (IEA) said on Wednesday, as it stuck by its estimates for demand growth this year and next.

OPEC and its allies, known as OPEC+, began limiting supplies in 2022 to bolster the market. This month, oil benchmark Brent breached $90 a barrel for the first time this year after Saudi Arabia and Russia extended their combined 1.3 million barrels per day (bpd) cuts until the end of the year.

Output curbs by OPEC+ members of more than 2.5 million bpd since the start of 2023 have so far been offset by higher supplies from producers outside the alliance, including the United States, Brazil and still under-sanctions Iran.

"But from September onwards, the loss of OPEC+ production, will drive a significant supply shortfall through the fourth quarter," the agency said in its monthly oil report.

However, the lack of cuts at the start of next year would shift the balance to a surplus, the agency said, highlighting that stocks will be at uncomfortably low levels, increasing the risk of another surge in volatility in a fragile economic environment.

Reuters