Opec+’s decision to cut oil production starting next month threatens to plunge the global economy into recession and higher crude prices will increase energy security risks worldwide, the International Energy Agency warned.
Last week’s move by the oil cartel, led by Saudi Arabia and its allies, including Russia, to cut its production target by 2 million barrels per day has reverberated around the world. The US has accused Saudi Arabia of joining Russia in driving up oil prices at a time when much of the world is struggling to contain rising inflation.
The Paris-based IEA, which advises OECD countries on energy policy, said the planned austerity measures had already affected global oil demand.
“The OPEC+ bloc’s plan to severely curtail oil supply to the market has derailed the oil supply growth trajectory for the remainder of this year and next year, resulting in higher price levels exacerbating market volatility and concerns about increase energy security,” the agency said. Thursday in the monthly oil report.
“With unrelenting inflationary pressures and rate hikes taking their toll, higher oil prices could be the tipping point for a global economy already on the brink of recession,” it added.
The warning came after the IMF this week lowered its forecast for global economic growth for 2023 to 2.7 percent, the lowest growth forecast for the coming year since 2001, and predicted that next year would see a recession in much of the world. can feel.
Demand for oil in the last three months of the year is now expected to fall by 340,000 b/d compared to last year, the IEA said. The agency cut forecast demand growth for 2023 by 470,000 b/d to 1.7 million b/d.
But even with lower global demand, the “massive cut” in OPEC+’s oil supply would “significantly reduce” the world’s ability to replenish supplies through the remainder of the year and the first half of 2023. ready. At the end of August, OECD oil reserves were 243 million barrels below the five-year average of 2.7 billion barrels.
Saudi Arabia has defended the cuts, arguing that they are necessary to avoid a collapse in oil prices that would hurt supply in the long run. OPEC+’s decisions were “based purely on economic considerations” and not “politically motivated” to hurt the US, the Gulf Kingdom State Department said Thursday.
With many OPEC+ members already falling short of their target production levels, the actual decline in physical oil supplies due to the austerity measures from November is expected to be around 1 million b/d, the IEA said.
However, Opec+’s supply could fall further due to the full implementation of the EU embargo on Russian crude, imposed during the war in Ukraine, from December 5, it added.
Next year, the IEA expects Russian oil production to average 9.5 million b/d, up from 10.9 million b/d in 2022, with a production stoppage of nearly 2 million b/d due to the mounting impact of sanctions.
“We expect Russian oil production to gradually decline from next month and assume that the decline will deepen in December when the EU embargo on Russian crude oil comes into effect,” it said.
The agency warned that Russian production could rise further if, as Russian officials have threatened, Moscow cuts its own production to offset any negative impact of a proposed price cap on Russian oil exports.