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The International Energy Agency (IEA) warned on Wednesday that due to continued output curbs by major producers Saudi Arabia and Russia, oil markets could face the greatest supply crisis in more than a decade by the end of this year.
According to the organisation, a “significant supply shortfall” may cause market price volatility due to insufficient global stockpiles. After Moscow and Riyadh announced intentions to continue export and output restrictions until 2023, it anticipates oil markets to face a 1.2 million barrel per day (bpd) shortage in the second half of the year.
Meanwhile, the Organisation of Petroleum Exporting Countries (OPEC) stated in a separate study on Tuesday that if OPEC+ leaders maintain their production curbs, the gap may reach 3.3 million bpd in the fourth quarter.
Russia said last week that it would prolong its voluntary cut in oil shipments by 300,000 bpd until the end of the year in order to balance global oil markets. Riyadh followed suit, extending its voluntary output cut of 1 million bpd until December.
Even if Moscow and Riyadh loosen their limitations, crude inventories would be significantly depleted by 2024, exposing oil prices to “shocks,” according to the IEA. On Wednesday, global benchmark Brent crude rose beyond $92 per barrel, while US West Texas Intermediate (WTI) crude traded above $89 per barrel.
“The market is really tightening in the second half of the year,” IEA oil market division chief Toril Bosoni told Bloomberg. “According to preliminary data, global oil inventories fell by a massive 75 million barrels in August.”
Oil prices have risen by more than 25% since late June, owing to increased global fuel demand, and are expected to rise back above $100 per barrel, according to JPMorgan Chase & Co. and RBC.