Oil supply cuts agreed by OPEC+ nations last week are putting global markets on track for a hefty supply deficit that will widen as the year progresses, the latest data from the group indicate.

World markets may be undersupplied by about 2m barrels a day in the fourth quarter as a result of cutbacks announced by Saudi Arabia and its partners, according to figures in a report from the Organization of Petroleum Exporting Countries.

Riyadh and its partners shocked crude traders and sent prices rallying with the supply reductions announced on April 2. OPEC officials said the move was necessary to deter speculators from making unwarranted wagers against oil, but the International Energy Agency, which advises consuming nations, called the decision a “bad surprise.”

Oil futures have climbed to USD 87 a barrel in London since the cuts were revealed. That has revived fears over inflation and global economic growth, while also shoring up revenues for the 23 members of the OPEC+ coalition. Some forecasters think the tighter outlook could herald the return of USD 100 oil. 

The report on Thursday from OPEC’s Vienna-based research department provides some justification for the curbs, which should whittle down the supply surplus projected for this quarter. 

Oil inventories are above their five-year average, and current output from OPEC’s 13 members is about 300,000 barrels a day more than needed from April through June, at 28.8m barrels a day. 

But in the second half of the year world markets stand to tighten considerably. OPEC already expected a supply deficit to emerge over the summer, and the newly unveiled cuts will make the shortfall even more pronounced.

While OPEC+ described the cutbacks as a “precautionary measure aimed at supporting the stability of the market,” the group continues to forecast a substantial jump in global oil demand this year. Consumption will climb by 2.3m barrels a day, surpassing pre-pandemic levels to reach a record 101.89m a day, it projects. 

In practice, OPEC’s output reductions are expected to be smaller than advertised as some members are already pumping below their target levels. But even if only the group’s core Gulf states were to implement the deal, OPEC output should drop to about 28m barrels a day — roughly 1.6m a day less than the organization thinks will be needed in the third quarter, and at least 2m less than is required in the fourth. 

Demand for the group’s crude is projected to reach 30.3m barrels a day in the last three months of the year, according to the report.

The shortfall could be tempered considerably because of Russia, a key member of the wider OPEC+ coalition, which is separately slashing production in response to sanctions over the war in Ukraine. 

OPEC’s calculations assume that Russian supplies will slump by 750,000 barrels a day on average this year, and suffer a sharp plunge this quarter. That’s a much larger drop than the 500,000-barrel-a-day reduction recently pledged by Moscow. 

Russian exports have proved stubbornly resilient despite promises to punch back against international censure over the invasion, though a slow-down in the latest shipping data suggests sanctions may be starting to bite.

The OPEC+ alliance is scheduled to review output policy for the second half of the year at a meeting in early June.