While Saudi Arabia’s pledge to extend production cuts and Russia’s pledge to extend export cuts may have made headlines, it is the continued inventory draws in the U.S. that are tightening markets, OilPrice said.
OPEC+ production cuts and extended supply reductions by Saudi Arabia and Russia have pushed oil prices t a peak of over $90 a barrel for 2023. Whilst market sentiment was capped by weaker-than-expected macroeconomic data from China earlier this week, the fourth consecutive crude inventory draw in the United States combined with another week-on-week drop in gasoline stocks provided firm support for ICE Brent to stay around $90 per barrel.
The extension of Saudi and Russian supply and export cuts until December 2023 didn’t materially change global balances, but it reiterates the bullish narrative of tight supply further down the road. OPEC+ may be forces to ones again extend or deepen oil cuts in 2024 as supply balances remain elevated, Citi analysts said. Global demand in 2024 is likely to decelerate due to weak economic growth while supplies remain elevated.