The International Energy Agency said, oil prices are heading for a surge in volatility amid an expected ‘significant supply shortfall’ on the market in the 4th quarter of 2023, due to the Saudi-led cuts to OPEC+ oil supply.
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 closely-watched Oil-Market Report for September.
Last week, Saudi Arabia and Russia extended their production and export cuts of 1 million barrels per day 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 however, a calm August was followed by the announcements of extensions of the supply cuts in early September, which sent prices and volatility higher.