restrictions on oil production by OPEC+ countries will lead to a significant shortage of oil on the world market in the second half of 2023

Restrictions on oil production by OPEC+ countries will lead to a significant shortage on the world market in the second half of 2023, according to a new report from the International Energy Agency (IEA). Until now, the voluntary reduction in production by the countries of the agreement has been offset by increased supplies from the United States and Brazil. Now the IEA notes that oil supply is not keeping pace with growing demand. The rise in oil prices led to the fact that Russia’s income from its exports, according to IEA estimates, increased in August to the maximum since the fall of 2022.

Global oil demand in 2023 will increase by 2.2 million barrels per day (b/d) relative to 2022, the IEA noted in a September report. The agency’s forecast was the same in August, but in September the demand estimate for last year was significantly reduced – by 373 thousand bpd, to 99.57 million bpd. So demand is now expected to be 101.81 million bpd in 2023. Its growth continues to be driven by the gradual recovery of major economies, including China. In July, oil demand in China for the third time in a year reached a historical high, amounting to 16.7 million bpd. The IEA expects that this year “despite the difficult economic situation” (see “Kommersant” dated August 16) demand in this country will increase by 1.6 million bpd (this is about 70% of the expected global increase).

Oil supply in 2023, according to IEA estimates, will grow less, by only 1.5 million bpd. The main contributors to its growth will be the USA, Iran and Brazil. Until now, supplies from these countries have maintained balance in the world market. Now, analysts note, the growth in supply is not keeping pace with the growth in demand. This is already reflected in the IEA data for July and August: the global oil deficit in these months amounted to 1.5 million b/d and 1.7 million b/d, respectively.

The agency believes the deficit will continue to widen and become significant in the fourth quarter. The reason for this is a combination of two factors: high demand and reduced oil production by OPEC+ countries.

According to IEA estimates, in August the production of countries that agreed to voluntarily reduce it “to maintain market stability” amounted to 22.87 million bpd, which is 2.55 million bpd less than the target value. Saudi Arabia’s production in August amounted to 8.98 million bpd, decreasing by 100 thousand bpd, in Russia it remained at the July level of 9.48 million bpd. Analysts note that according to this indicator, the Russian Federation is ahead of Saudi Arabia for the second month in a row and, most likely, will retain its leadership until the end of the year.

Let us note that so far none of its participants have announced plans to wind down the agreement on limiting production. On the contrary, at the last in-person meeting, which took place on August 4 in Vienna, representatives of OPEC+ countries confirmed their desire to extend it until the end of next year. It is unclear, however, how long the Russian Federation and Saudi Arabia will extend their own restrictive measures, which complement OPEC+ (see “Kommersant” dated August 14). The IEA reminds that the September decisions of these countries to extend restrictions until the end of the year provoked a jump in the price of Brent oil above $90 per barrel. In general, oil prices were relatively stable in August, analysts say.

As follows from IEA data, a barrel of Russian Urals in August cost an average of about $70 (according to estimates by the Russian Ministry of Finance – $74). So the $60 price ceiling set for Russian oil by the EU, G7 and Australia has been exceeded again. In the first week of September, Urals traded at an even higher price – an average of $75 per barrel, the report says (explained by a decrease in Russian exports).

Let us note that despite the fact that the price of Urals now consistently exceeds the established threshold, neither the European Union nor the G7 have yet deployed any new measures of pressure on violators.

Meanwhile, higher oil prices led to the fact that Russia’s revenues from its exports, according to IEA estimates, increased in August by $1.8 billion, to $17.1 billion. This is the maximum since the fall of 2022.

Kristina Borovikova