The IEA has warned of a potential global oil shortage in the fourth quarter, driven by OPEC+ producing about 900 thousand barrels per day less than demand. This shortfall emphasizes how balance in the oil market hinges on coordinated output decisions by major producers and the pace of consumption worldwide.
In 2023, the IEA highlighted that drawing down existing oil reserves in the third and fourth quarters could squeeze refining margins and limit supply, potentially leading to notable shortages in petroleum products as the year closes.
In November, Russian Deputy Prime Minister Alexander Novak announced that Moscow would extend a voluntary cut of 300 thousand barrels per day in oil and product supplies to global markets through the end of 2023. Earlier, Russia had begun a 500 thousand barrel per day reduction in fuel production in March. These moves are part of broader geopolitical decisions affecting global flows.
How did OPEC+ reduce oil output?
OPEC+ reported plans to trim total oil production by roughly 1.4 million barrels per day to about 40.46 million barrels per day starting in 2024, with Russia, Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Sudan and South Sudan among those affected. By year-end, the alliance had cut roughly 2 million barrels per day, pulling output to around 41.856 million barrels per day. The aim cited by OPEC+ centers on stabilizing the oil market and creating long-term predictability for producers and buyers alike.
Data from OPEC shows Russia cutting its output by 300 thousand barrels per day as of late March, with production hovering around 9.7 million barrels per day in spring and around 10 million barrels per day in February. Novak noted that Russia’s current reduction stands near 500 thousand barrels per day versus February, sustained through the end of 2023.
Saudi Arabia announced on October 4 that it would continue voluntary cuts of 1 million barrels per day through the end of 2023. OPEC+ actions since 2020 have included a range of contractions to balance demand and supply, with the alliance repeatedly citing a goal of market predictability even as global markets face fluctuating demand. The White House has criticized these steps, arguing they amount to solidarity with Russia.
IEA data indicate Russia reduced its oil and product exports by about 70 thousand barrels per day in October, with export revenue dipping as global oil prices eased. October Russian oil production stood near 9.53 million barrels per day, compared with 9.5 million the prior month. The dynamic shows how price movements interact with supply decisions on multiple fronts.
IEA observers note that price shifts can influence profit margins more than the discount levels on Urals versus Brent, even as volumes remained relatively robust. Oil availability remained higher than in September, while product availability softened in some segments.
What could the shortage mean?
Andrei Loboda, BitRiver’s economist and communications director, cautions that a global shortfall in the fourth quarter is plausible if demand continues to exceed supply. He points to rising consumption in large markets like India and China as a key driver, alongside ongoing post-pandemic demand recovery. Limited new investment in upstream projects can also pressurize supply further.
Despite increased U.S. production, pockets of scarcity are emerging, with experts noting that Russia and Saudi Arabia intend to keep Brent prices within a broad target band. Analysts such as Igor Yushkov of the National Energy Security Fund argue that prices around the mid-80s to mid-90s dollars per barrel help stabilize budgets and spending, while overly high prices could dampen demand across households and businesses.
Through year-end, production adjustments by Saudi Arabia and Russia appear set to continue, while some non-OPEC producers fall behind plans. This could limit supply growth just as Chinese demand continues to rise, potentially keeping the market tighter than expected. Independent analysts have flagged the possibility that Brent crude could approach the upper 90s range if supply remains constrained and geopolitical tensions persist.
The market’s direction will also hinge on broader macroeconomic signals, including potential shifts in U.S. interest rates and the pace of Chinese economic activity. Some observers warn that further rate moves by the U.S. Federal Reserve could cap price gains in the near term, while China’s economic trajectory and sanctions-related developments remain in play for material exports from Russia and other producers.
What does this mean for Russia?
Analysts note that Russia benefits when Brent trades in a relatively high range, with budgets adjusted to prevailing prices. Prices in the mid-to-high 80s drawn favorable for Russian revenue, supporting state spending and energy-related tax receipts. When prices strengthen, export earnings rise and consumer incomes can edge higher, enabling more social and developmental programs.
Experts emphasize that Russia and other major producers may expand supply if prices exceed comfortable levels, while global buyers adjust their procurement strategies. The broader budgetary picture hinges on sustained export performance and the ability to manage fiscal reserves for national projects and social programs.
Overall, observers caution that while higher prices can boost revenue, they also risk dampening demand if consumers and businesses face elevated energy costs. The balance between supply discipline and market access remains the central theme of the current energy dialogue, with market participants watching policy signals, production plans, and geopolitical developments closely.