OPEC data show 'sudden' supply shortages in global oil market

According to Bloomberg on August 10, 2023, OPEC has released statistics showing that the global crude oil market will have a supply gap of more than 2 million barrels per day in the third quarter due to Saudi Arabia's production cuts.

A report released by OPEC on Thursday (Aug. 10) showed that OPEC's crude oil production fell sharply in July as Saudi Arabia implemented a unilateral production cut to boost the market.

Saudi Arabia will maintain its production cuts in August and September as planned, meaning that OPEC's average crude output throughout the third quarter will be 27.3 million barrels per day (bpd) at the current level. That's a shortfall of about 2.26 million barrels a day over consumer demand, which could lead to the sharpest drop in global inventories in two years, according to OPEC.

Oil prices climbed to a seven-month high of nearly $88 a barrel on the London market as global crude consumption rose to record levels and OPEC and its partners restricted crude supplies, depleting inventories in the United States and other countries.

Major crude consumers have criticized Saudi Arabia and its allies for restricting crude production and warned that another spike in inflation could cause more pain for consumers. Nonetheless, Saudi Arabia has said it could extend or even deepen supply restrictions if necessary.

Still, it's also possible that global crude inventories won't fall as sharply as OPEC predicts.

Concerns about the health of the U.S. economy also persist.

But for now, it's clear that the global oil market is tightening.

According to OPEC's report, crude oil production from OPEC's 13 member countries fell by a whopping 836,000 barrels per day (bpd) in July, as Saudi Arabia reduced its crude oil production to about 9 million bpd. OPEC estimates that crude inventories in developed countries are already below their five-year average.

Crude supplies from the broader coalition of oil-producing countries, OPEC+, are also declining, and Moscow is honoring the OPEC+ production cut agreement by reducing its crude exports.

OPEC forecasts that global crude consumption will increase by 2.4 million barrels a day to 102 million barrels a day this year. OPEC expects global crude oil consumption to increase by a further 2.2 million barrels per day in 2024.

The International Energy Agency (IEA), which advises oil-consuming countries, will release its latest assessment of the global oil market on Friday. The OPEC+ coalition of 23 oil-producing countries will meet at the end of November to review production policies.
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