IEA: OPEC+ Production Cuts to Send Oil Prices, Volatility Surging

Emmanuel Addeh in Abuja

Oil price volatility is expected to surge as a result of the recent Organisation of Petroleum Exporting Countries (OPEC) supply cuts, the International Energy Agency (IEA) has said.

According to the agency, the loss of OPEC+ supply from September onwards will drive a significant supply shortfall.

The surge in volatility amid an expected significant supply shortfall on the market will occur in the fourth quarter of 2023, due to the Saudi-led cuts to OPEC+ oil supply, it added.

So far this year, higher crude oil production from countries outside the OPEC+ alliance has managed to offset part of the OPEC+ cuts. 

“But from September onwards, the loss of OPEC+ production, led by Saudi Arabia, will drive a significant supply shortfall through the fourth quarter,” the IEA said in its Oil Market Report for September.

Last week, Saudi Arabia and Russia extended their production and export cuts of 1 million barrels per day (bpd) and 300,000 bpd, respectively, until the end of 2023, pushing Brent Crude prices to above $90 per barrel and the highest level in 10 months.

Oil prices traded in relative calm during August, with volatility at multi-year lows, the IEA said. But a calm August was followed by the announcements of extensions of the supply cuts in early September, which sent prices and volatility higher.