Oil Prices Projected Higher on Supply Cuts by Saudi Arabia and Russia

Much depends on the economic outlook. If concerns about inflation and global growth ease, the price of oil may rise.

“I expect crude oil prices will rise sharply in the second half of this year due to solidly recovering demand in China, India, the U.S. and elsewhere, along with deep supply cuts by OPEC+ producers, especially Saudi Arabia,” said Bob McNally, president of Rapidan Energy Group, a research firm.

There are signs that Russia is cooperating with the Saudi-led cuts. The International Energy Agency said that in June Russian oil exports fell by about 8 percent compared with a month earlier. Moscow’s revenues from these sales fell by almost 50 percent, to $11.8 billion, compared with a year earlier, the agency estimated.

Russian seaborne exports have dropped again in July to their lowest level this year, according to Viktor Katona, an analyst at Kpler, a firm that tracks these shipments.

Other factors may limit any significant rise in prices. For the first time this year, the International Energy Agency trimmed its forecast for growth in oil demand in 2023 by 220,000 barrels a day, to 2.2 million barrels a day, largely because of slower than expected growth in China.

While global demand for oil is still expected to reach a record level of more than 102 million barrels a day in 2023, the agency forecasts that the pace of growth will halve in 2024, in part because electric vehicles help curb oil consumption.

At the same time, supplies are continuing to grow outside of OPEC from countries including the United States, Brazil and Guyana, offsetting at least some of the impact of the group’s cuts.

OPEC also remains a source of potential additional oil. The new cuts will take Saudi Arabia’s production to just 9 million barrels a day, the lowest in two years, the International Energy Agency estimates, trailing Russia as OPEC Plus’s top producer. The Saudis want to bring back that production as soon as possible, analysts said.