On Friday the International Energy Association (IEA) warned that the recent announcement of production quota cuts from OPEC+ could undermine any economic recovery of the world economy, by aggravating an oil supply deficit later this year.

Earlier in the month, some of the largest producers in OPEC announced that to stabilize prices within the oil market, they would be imposing an additional 1.16 million barrel per day voluntary reduction in oil production which would last from May until the end of the year. The cuts were to be in addition to the 500,000 barrel per day production cuts announced by Russia in response to economic sanctions imposed by Western powers, and the 2 million barrel per day cut in production targets announced by OPEC+ in November.

In its latest oil market report, the IEA wrote, “Our oil market balances were already set to tighten in the second half of 2023, with the potential for a substantial supply deficit to emerge. The latest cuts risk exacerbating those strains, pushing both crude and product prices higher.,”

In announcing the new cuts, the Saudi Ministry of Energy said it viewed the new cuts as a “precautionary measure aimed at supporting the stability of the oil market.”

For its part the Kremlin said that the announcement by the OPEC+ oil producers, who are responsible for the production of about half of all global oil supplies, was made necessary by the recent economic volatility due to the banking crisis in the US and Europe, a general uncertainty which had been rattling global markets, as well as unpredictable and short-sighted energy policy decisions being made by policymakers.

Prior to the announcement oil prices had fallen to a 15-month low. Following the decision, they saw an overall rise, with Brent crude trading at $86.30 per barrel, and West Texas Intermediate trading at $82.40.