A global shortfall in crude oil supply is set to deepen in the third quarter as the world's top exporter Saudi Arabia pledged extra output cuts from July in a move likely to push Brent towards $100 a barrel by the end of the year, analysts said.
Oil prices jumped more than $1 a barrel on Monday as the Saudi energy ministry said on Sunday its output would drop to 9 million barrels per day in July from around 10 million bpd in May, the kingdom's biggest reduction in years.pledged by Saudi is on top of a broader deal by the Organization of the Petroleum Exporting Countries and their allies including Russia to extend production cuts into 2024 as the group seeks to boost flagging oil prices.
The move has paved the way to tighter supplies and put a $70 a barrel floor under prices, analysts said, however the Saudi cut is not likely to drive prices sharply higher immediately as it will take time for inventories to be drawn down. Goldman Sachs analysts Daan Struyven and Callum Bruce said the "moderately bullish" OPEC+ meeting partly offsets some bearish risks to the bank's December 2023 price forecast of $95 a barrel, including stronger-than-expected supply from Russia, Iran, and Venezuela, and weaker-than-expected Chinese demand.
However price gains may be limited in the short term until there are signs of tightening in the physical market, they added.
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