OPEC data indicated global oil markets are headed for a sharp supply shortfall of more than 2 million barrels a day this quarter as Saudi Arabia cuts production.
Production from the Organization of the Petroleum Exporting Countries fell last month as the kingdom implemented a unilateral cut to shore up markets, the group said in a report on Thursday.
The Saudis will keep the cut this month and next as planned, meaning OPEC output could average the current rate of about 27.3 million barrels per day for the entire quarter. OPEC data suggests that is about 2.26 million a day less than consumers require, which could lead to the sharpest fall in inventories in two years.
Oil prices have risen to a seven-month high near $88 a barrel in London as global consumption surges to record levels as OPEC and its partners tighten supply, depleting stocks in the U.S. and other places.
Major consumer nations have criticized the Saudis and their allies for curbing output, warning that a rebound in inflation could cause more pain for consumers. However, Riyadh has said it could extend and even deepen supply constraints if necessary.
Still, inventories may not fall as dramatically as OPEC projections suggest.
Demand in China, the world’s largest importer, is clouded by lackluster economic indicators. The country’s crude imports fell in July to the lowest level in six months, and its latest consumer price index suggested the Asian giant slipped into deflation. Concerns about the health of the US economy also persist.
But for now, the oil market is clearly tightening.
Production from the 13 OPEC members fell by 836,000 barrels a day in July as the Saudis cut output to about 9 million barrels a day, the group’s report said. Oil inventories in developed countries are below their five-year average, OPEC estimates.
Supplies are also being cut from a broader alliance of producers known as OPEC+, which includes Russia. After holding exports steady for months to finance its brutal war against Ukraine, Moscow is belatedly complying with an OPEC+ deal by cutting shipments.
OPEC expects daily global oil consumption to rise by 2.4 million barrels this year to an average of 102 million barrels. It predicts a further increase of 2.2 million barrels per day in 2024.
The International Energy Agency, which advises consumer nations, will release its latest assessment of global oil markets on Friday. The full 23-nation OPEC+ alliance will meet for a production policy review at the end of November.
