Saudi-led oil cuts risk worsening inflation, threat to global growth, warns IEA
The oil market will fall into a much larger oil deficit far sooner than expected, following surprise production cuts from some of OPEC’s leading members, the International Energy Agency said Friday.
The decision, taken by Saudi Arabia and a selection of some of OPEC’s largest oil producers, to cut oil CL.1, -0.12% output by nearly 1.2 million barrels a day was announced earlier this month and took the oil market by surprise. It came just as a consensus among industry analysts predicted that the oil market would need to pump more oil, rather than less, in order to satisfy rebounding demand in China and prevent prices from jumping.
Oil-producing nations not part of OPEC are set to increase their output during the same period, which should soften the impact. That includes a group of smaller oil producers such as Guyana and Nigeria, who are proving to be a wild card for the market. “Oil market balances were already set to tilt into a substantial deficit in the second half of this year, but the new cuts risk further tightening balances and pushing up oil prices at a time when inflationary pressures are already hurting vulnerable consumers,” the IEA said in the report.
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