IEA hints at “substantial" crude oil supply deficit this year

“Record” world oil demand, “buoyed by a resurgent China”, and surprise cuts by the OPEC+ producer bloc, to drive down global crude supply by 400,000 b/d by the end of this year, the International Energy Agency (IEA) forewarns.

PHOTO: Getty Images

The IEA expects global oil demand to grow by 2 million b/d to a historic 101.9 million b/d this year. But production cuts by OPEC+ will lead to tightening of global supply, it warns.

The Paris-based energy agency estimates that non-OPEC countries will increase production by 1 million b/d this year. However, the output rise will not be enough to counter production cuts by OPEC and its allies.

Some OPEC+ members have pledged to voluntarily lower crude production, totaling 1.16 million b/d from May till the year-end, despite falling short of quotas. Major supplier Russia has also extended its 500,000 b/d production cuts to the year-end. These cuts are in addition to the two million b/d output cuts announced last October, bringing this year's total reduction to 3.66 million b/d.

“For the year as a whole, global oil production growth slows to 1.2 mb/d [million b/d] versus 4.6 mb/d in 2022,” the IEA forecasts.

Worrying data

The IEA data shows that 19 oil-producing nations collectively produced 37.94 million b/d in March this year, which is 2.16 million b/d below their combined target.

The IEA has warned that the OPEC+' "precautionary move" will not only worsen the supply deficit this year but will also lead to higher crude prices at a time of “heightened economic uncertainty.”

The IEA's report highlights that consumers will bear the brunt of this move by the OPEC+.

“Consumers confronted by inflated prices for basic necessities will now have to spread their budgets even more thinly,” the IEA stated. This "augurs badly for the economic recovery and growth.”

By Konica Bhatt

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