The International Energy Agency (IEA) has warned that the production cuts made by OPEC+ could worsen the anticipated oil supply shortage in the latter half of the year, which could negatively impact consumers and the global economic recovery.
The IEA and OPEC+ have been in disagreement over their views on the outlook for global oil supply and demand. The IEA, representing consumer countries, has argued that the reduced supply could result in increased prices and threaten a recession, while OPEC+ has blamed Western monetary policy for market volatility and inflation, which undermines the value of its oil.
“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 IEA said in its monthly oil report.
“The latest cuts risk exacerbating those strains, pushing both crude and product prices higher. Consumers currently under siege from inflation will suffer even more from higher prices.”
According to the International Energy Agency (IEA), the recent decision by OPEC+ to cut oil output is a cause for concern as it could worsen the expected oil supply deficit in the second half of the year, which could adversely affect global economic recovery.
In its monthly oil report, OPEC cited the downside risks to oil demand during the summer due to high stock levels and economic challenges. The IEA estimates that non-OPEC+ countries will increase production by 1 million barrels per day (bpd) from March, while OPEC+ will experience a 1.4 million bpd decline, according to Reuters.
The IEA noted that rising global oil stocks may have influenced the OPEC+ decision. Furthermore, the IEA stated that the demand picture will be uneven between sluggish growth in OECD countries and rebounding demand led by China after the relaxation of COVID-19 restrictions. The IEA also reported that despite the European Union’s seaborne import ban and the United States’ price cap sanctions policy, Russian oil exports in March hit their highest levels since April 2020 due to robust oil product flows.
