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Extension of OPEC+ Supply Cuts: The IEA notes that the extension of supply cuts by OPEC+ until the end of 2023 will result in a substantial market deficit through the fourth quarter of this year. These cuts are aimed at stabilizing and supporting the oil market.

Market Deficit: OPEC and its allies, collectively known as OPEC+, began limiting oil supplies in 2022 to address oversupply concerns and bolster oil prices. This month, Brent crude oil prices exceeded $90 per barrel for the first time in 2023 after Saudi Arabia and Russia agreed to extend their combined cuts of 1.3 million barrels per day (bpd) until the end of the year.

Supply Shortfall: Despite higher oil supplies from non-OPEC+ producers like the United States, Brazil, and Iran (which is still under sanctions), the loss of OPEC+ production is expected to drive a significant supply shortfall starting from September and continuing into the fourth quarter of this year.

Shift to Surplus: However, the IEA also highlights that the lack of production cuts at the beginning of the next year could shift the market balance to a surplus. This change is expected to result in uncomfortably low oil stocks, raising the risk of increased market volatility. It suggests that the oil market remains in a fragile economic environment