The rating agency, Fitch Ratings, has disclosed that the Organisation of Petroleum Exporting Countries and Allies’ (OPEC+) decision to cut production by almost 1.2 million barrels per day from May until the end of this year should support prices in the short term.
The rating firm stressed that the move could increase the chances that the market could switch into a deficit in the second half of 2023, particularly due to recovering consumption in China.
The decision surprised the market, with Brent subsequently reaching about $85/bbl on April 3.
Brent was trading below $80/bbl in the second half of March despite sanctions related to Russian oil exports, compounded by concerns over the banking crisis fallout.
The sanctions have not removed any significant volumes from the market, as Russian oil and oil products were mostly redirected from Europe to other regions, notably Asia.
“We believe that the market was in a moderate surplus in Q1 2023 with OECD commercial inventories increasing by 32 million tonnes in January and a further 10 million tonnes in February”, Fitch said.
