The surprise OPEC+ output cuts could aggravate an oil-supply deficit this year and threaten economic recovery, the International Energy Agency (IEA) warned on Friday.
Earlier this month some of the leading producers within the group of 23 oil-exporting countries announced voluntary extra curbs of 1.16 million barrels per day starting from May until the end of 2023. The cut comes on top of the 500,000 barrels-per-day reduction in Russian output and a two-million barrels-per-day reduction in targets in effect since last November.
“Our oil market balances were already set to tighten in the second half of 2023, with the potential for a substantial supply deficit to emerge. The latest cuts risk exacerbating those strains, pushing both crude and product prices higher,” the IEA writes in its latest Oil Market Report.
The Saudi Ministry of Energy described the new cuts as a “precautionary measure aimed at supporting the stability of the oil market.”
According to Moscow, the measure by the OPEC+ oil producers, who control roughly 50% of global oil supplies, was necessary in a period of high volatility due to the ongoing banking crisis in the US and Europe, to general global economic uncertainty, and to unpredictable and short-sighted energy policy decisions.
Before the cuts were announced, oil prices dropped to a 15-month low, but the decision by OPEC+ pushed them higher. On Friday, Brent crude traded at $86.30 per barrel, while WTI at $82.40.
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