In its latest monthly oil market report, the IEA said the energy alliance’s self-described “precautionary move” likely spells bad news for consumers in times of increased economic uncertainty.
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The International Energy Agency warned on Friday that unexpected oil production cuts by oil producer group OPEC+ could exacerbate the projected supply deficit and could hamper economic recovery.
In its latest monthly oil market report, the IEA said the energy alliance’s self-described “precautionary move” likely spells bad news for consumers in times of increased economic uncertainty.
“Consumers facing inflated prices for basic necessities could have to spread their budgets even further,” the IEA said. “This bodes poorly for economic recovery and growth.”
Led by Saudi Arabia and Russia, OPEC+ is an influential group of 23 oil-exporting countries that meets repeatedly to find out how much oil to sell on the worldwide market.
Several OPEC+ members announced on April 2 that they intended to cut global production by a further 1.16 million barrels a day by the tip of the yr.
The decision, which the White House criticized, was imagined to be taken as a part of an independent initiative unrelated to broader OPEC+ policy.
The cuts add to Russia’s existing plans to cut production by 500,000 barrels a day from March until no less than the tip of the yr. This implies that the entire voluntary cuts of OPEC+ members will amount to greater than 1.6 million barrels a day.
Rising oil stocks likely contributed to the move, the IEA said, highlighting that OECD industry stocks in January hit their highest level since July 2021.
“Upward pressure” on oil prices
“We already expected the market to enter deficit in the second half of the yr. Now, after these cuts, which can happen from May, we expect the market to enter deficit much earlier and with larger losses in the second half of the yr,” Toril Bosoni, head of IEA’s oil industries and markets, told CNBC. Street Signs Europe”.
Bosoni said the OPEC+ cuts will see global oil supply fall by 400,000 bpd by the tip of the yr, as production increases in non-OPEC countries akin to the US, Brazil, Canada and Norway “won’t offset the declines we now expect from OPEC countries.” .
“So with increasing demand for oil [and] Continuing growth for the remaining of the yr, we expect inventories to come back back and upward pressure on prices,” she added.
Oil prices rose on Friday morning.
— Ruxandra Iordache of CNBC contributed to this report.