Reuters/Edgar Su
- Amid tight global supplies, the oil market is expected to face its biggest deficit in over a decade.
- That's as Saudi Arabia has extended its output cuts, while Russia plans to continue limiting exports.
- Crude oil prices rallied again on Tuesday after OPEC released market projections.
Saudi Arabia's output cuts will exacerbate tight global supplies, with the oil market expected to face its biggest deficit in over a decade.
According to Bloomberg calculations of the latest data from the Organization of Petroleum Exporting Countries, the amount of oil OPEC is pumping in the third quarter is about 1.8 million barrels per day less than what is needed to meet demand.
By the fourth quarter, that deficit is projected to widen, forcing countries to tap oil stockpiles to cover the shortfall. If OPEC production stays flat, as members have indicated, inventories will shrink by 3.3 million barrels per day, the most since at least 2007, according to Bloomberg.
West Texas Intermediate crude prices climbed 2% to $89.05 a barrel after the OPEC data came out. Brent crude, the international benchmark, rose 1.7% to $92.18.
The demand-supply imbalance comes as Saudi Arabia, OPEC's de facto leader, recently extended its production cuts. Meanwhile, Russia is extending its limits on oil exports.
Though the OPEC has often justified its production cuts as a way to keep oil markets balanced, its data shows that the reductions are placing downside pressure on global stockpiles.
As an example, commercial crude stocks among members of the Organization for Economic Cooperation and Development were 114 million barrels below their 2015-2019 average.
According to Bloomberg, Saudi Arabia may be aiming to bring oil price levels up to $100 a barrel as a way to finance costly domestic projects.