BAKU, Azerbaijan, August 12. OPEC+ could end up producing 2.2 mb/d below its crude requirement in 3Q23 and 1.2 mb/d below in the fourth quarter, based on our current predictions for demand growth and non-OPEC+ output, Trend reports.
As evident from the data received from the International Energy Agency (IEA), in July, global oil production dropped significantly by 910 kb/d to 100.9 mb/d. This decline was mainly due to Saudi Arabia following through on its commitment to reduce output. However, the situation was partially alleviated by a strong increase in oil supply from Canada.
Within the OPEC+ group, oil output decreased by 1.2 mb/d in July, reaching 50.7 mb/d, marking the lowest level since October 2021. In contrast, non-OPEC+ production surged by 310 kb/d, reaching an unprecedented 50.2 mb/d.
According to the IEA, the oil market is expected to become even tighter in the third quarter as Saudi Arabia and Russia, leaders of the OPEC+ alliance, recently announced the extension of additional voluntary supply cuts until September. Although this move will cause OPEC+ supply to drop to its lowest point in two years at 50.6 mb/d in 3Q23, the substantial non-OPEC+ supply growth will moderate the overall decline.
Looking forward to the fourth quarter, the possibility of OPEC+ increasing its output arises when Saudi Arabia and Russia, the two largest global producers after the US, decide to ease their additional restrictions. However, as the agency noted, the evolution of their market management strategy remains uncertain at present.
Riyadh has expressed its readiness to extend or deepen its 1 mb/d production cut, while Moscow plans to decrease exports by 500 kb/d this month and 300 kb/d in September. While there's significant potential for OPEC+ to boost production in the latter half of 2023, whether the bloc maintains its production targets throughout the year remains to be seen. If these targets remain unchanged, OPEC+ could end up producing 2.2 mb/d below its crude requirement in 3Q23 and 1.2 mb/d below in the fourth quarter, based on our current predictions for demand growth and non-OPEC+ output, the IEA stated.