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.
OPEC+ signaled it will stay the course as group leader Saudi Arabia extends a production cut aimed at shoring up global oil markets.
OPEC’s petroleum export revenues climbed to the highest in a almost a decade last year, as Russia’s war on Ukraine bolstered crude prices and key members ramped up production.
“They are in general pumping what they can. They are reluctant to switch off production as they may not be able to turn it back on down the line,” the Welligence official said.
Saudi Arabia will make an extra 1 million barrel-a-day oil supply cut in July, taking its production to the lowest level for several years after a slide in crude prices.
Oil prices are likely to fall below $80 a barrel even with OPEC’s recent apparent efforts to support that level with unexpected cuts, according to Ed Morse, global head of commodities research at CitiGroup.
Oil steadied at the week’s open as traders assessed challenges to supply in the wake of the unexpected output cut by OPEC+.
There’s concern that the move by OPEC+ will inject fresh vigor into inflationary pressures.
OPEC+ announced a surprise oil production cut of more than 1 million barrels a day, abandoning previous assurances that it would hold supply steady and posing a new risk for the global economy.
Oil headed for the biggest weekly loss this year after banking turmoil rippled across global markets, with investors watching for a potential response to the rout from OPEC and its allies.
OPEC expects a slightly tighter global oil market than previously forecast as the group nudged up its demand estimate and trimmed its supply outlook.
Oil fell on a US plan to sell more crude from its reserves, offsetting a lift from Russian output cuts and rising Chinese demand.
OPEC’s top official urged countries to invest much more in oil to meet the world’s future energy needs and said climate policies need to be more “balanced and fair.”
Oil prices may rise to $100 a barrel in the second half of the year as China’s economy emerges from anti-virus lockdowns, Iran’s liaison to OPEC said.
OPEC appointed Obiang Lima president for 2023. He is also the head of the Gas Exporting Countries Forum (GECF). For now, he continues to hold both those positions.
An OPEC+ committee recommended keeping crude production steady, delegates said, as the oil market awaits clarity on demand in China and supplies from Russia.
Global oil markets face a bigger surplus this quarter than previously expected, with demand still constrained despite China’s bid to reopen its economy from Covid lockdowns.
“It’s practical to hit 2.2mn bpd in 2023, this is practical. It’s a moving target,” Kyari said. “There are a number of projects that I have clear line of sight that can come on board in 2023.”
Global oil and gas supplies are on course to tighten further this year as OPEC sticks to its guns and other producers struggle to fill the gap.
Oil fell for a fourth day as warnings from major US banks of a tough outlook for 2023 stoked concern over demand prospects and dented appetite for risk assets including commodities.
OPEC+ responded to surging volatility and growing market uncertainty by keeping oil production unchanged.
Oil extended a rebound from the lowest level in almost a year on speculation that the Organization of Petroleum Exporting Countries and its allies will deepen supply cuts to respond to weakening global demand.
OPEC held firm to projections that global oil demand will keep growing for another decade, and said it would be dangerous to abandon fossil fuels.
OPEC+’s decision to cut oil production will hurt the global economy and add to inflationary pressures, a senior US official said during a visit to the Middle East.
The United Arab Emirates energy minister has defended OPEC+’s decision to cut production as a purely technical move, denying talk of discord and politics.