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Saudi Arabia's decision to extend its voluntary production cut of 1 million barrels per day (b/d) through the end of this year is expected to reduce global oil inventories, leading to upward pressure on oil prices in the coming months. The Short-Term Energy Outlook (STEO) forecasts that the Brent crude oil spot price will average $93 per barrel (b) in the fourth quarter of 2023 (4Q23). However, prices are anticipated to decline in 2024, averaging $88/b, primarily due to slowing oil demand growth, non-OPEC oil production increases, and the conclusion of Saudi Arabia's voluntary production cuts. In August, the Brent spot price averaged $86/b, representing an $11/b increase since June. This price surge was driven by Saudi Arabia's extension of voluntary production cuts through September and a decrease in U.S. commercial crude oil inventories, which reached their lowest levels since December 2022. The current assessment suggests that global oil inventories are decreasing by 0.6 million b/d in the third quarter of 2023 (3Q23), followed by a more moderate draw of 0.2 million b/d in 4Q23. OPEC+ production cuts are expected to keep global oil production below global demand. As a result, the Brent spot price is predicted to stay above $90/b through the first quarter of 2024 before averaging $87/b for the remaining three quarters of the year. Nevertheless, the potential for ongoing voluntary production cuts presents some upside risk for oil prices. Powered by Commodity Insights
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