Saudi Arabia, Russia cuts to create global oil shortfall, drawing international criticism

Deepening Saudi oil cuts that are planned to occur until the end of the year will contribute to a 3-million-barrel per day (bpd) shortfall in the global supply of oil even as some oil producing states increase output, data published by the Organisation of Petroleum Exporting Countries (OPEC) appears to show.

The shortfall, set for the last quarter of 2023, follows from a two million bpd shortfall in quarter three and, according to Bloomberg, could see the biggest global oil inventory decrease since 2007 as states eat into their own reserves to make up for the shortfall.

According to OPEC, the supply of oil from its member states needs to be at around 30.7 million bpd in order to satisfy oil consumption in the fourth quarter, although OPEC production rates are currently averaging 27.4 million bpd.

The International Energy Agency (IEA) has warned that the shortfall in oil supply could increase "the risk of another surge in volatility that would be in the interest of neither producers nor consumers, given the fragile economic environment."

The IEA also added that "the extension of output cuts by Saudi Arabia and Russia through year-end will lock in a substantial market deficit through the fourth quarter."

It comes after Saudi Arabia announced it would further cut its oil output by one million bpd alongside a Russian reduction of 300,000 bpd.

The Saudi cut is speculated to be a bid to increase state revenue.

The IMF last week projected that Saudi Arabia would swing to a fiscal deficit of 1.2 percent of GDP in 2023 on the back of a projected decline in oil growth by 2.5 percent, although the Saudi government has forecasted a narrow budget surplus.

The resulting supply cut announcements have pushed the price of oil to above $90 per barrel.