By Yusuf Khan Saudi Arabia's decision to extend cuts to crude oil output until the end of the year is likely to lead to a significant supply shortfall for...
Saudi Arabia's decision to extend cuts to crude oil output until the end of the year is likely to lead to a significant supply shortfall for the rest of the year, keeping prices higher at the pump, according to the International Energy Agency.
However, with Saudi production and also Russian exports being cut until the end of the year, the market is now likely to see a significant shortfall of about 1.1 million barrels a day in the fourth quarter, something which is likely to support prices, the IEA said Wednesday. The unwinding of the cuts in 2024 should bring the market back to surplus but a lack of oil inventories could mean high volatility in the market, the Paris-based agency added.
The cuts come on top of expected further demand growth, with oil demand set to rise by 2.2 million barrels a day in 2023, averaging 101.8 million barrels a day, according to the IEA. This demand growth is likely to temper next year to 1 million barrels a day, averaging 102.8 million barrels a day, the IEA said.
The Paris-based agency added that global oil inventories fell by 76.3 million barrels a day, hitting a 13-month low in August. It said that next year,"oil stocks will be at uncomfortably low levels, increasing the risk of another surge in volatility that would be in the interest of neither producers nor consumers, given the fragile economic environment."
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