saudi arabia is set to fall below russia as the largest oil producer in the opec alliance as its production cuts begin to bite tightening the oil market just as prices appear to be turning higher the iea said the gulf kingdom de facto leader of the organization of the petroleum exporting countries has in recent months slashed its oil output sacrificing its market share within the oil producers group in an attempt to buoy low oil prices that have crimped its revenue the cuts which have largely not included other members of the oil cartel or its allies in a wider group known as opec have so far been undermined by stronger output from nonopec producers such as the us but those rival supply increases look set to come to an end just as a unilateral 1 million barrel a day production cut by the saudis is set to begin this month while russian output also appears to be decliningthough at a slower pacethe iea said in its monthly market report the 1 million barrel a day cut which riyadh said last week it would extend into august too will see the major oil producers output slip to a twoyear low of 9 million barrels a day and make it the secondlargest producer in the opec alliance below russia for the first time since early 2022 barring the artificially low production levels during the covid19 pandemic the cuts will see saudi production slip to its lowest level since 2011 in bearing the brunt of the supply cuts saudi arabia and its energy minister abdulaziz bin salman have gone all in on a risky strategy to support the kingdoms oil revenues at the expense of its share of the market analysts estimate riyadh needs oil prices of around 80 a barrel in order to balance its state budget and fund lavish infrastructure projects russia too has pledged to reduce its oil production but has dragged its feet over the cuts that appears to be changing the iea said with the nations oil exports slumping by 600000 barrels a day in june to 73 million barrels a day its lowest level since march 2021 still russia may be choosing to ignore the cuts keeping its production levels steady to satisfy domestic consumers while reducing its exports the iea noted the saudis unilateral move came after cuts undertaken in concert with the wider opec group largely failed to have any impact on oil declining oil prices the group agreed in april to slash output by around 16 million barrels a day adding to a 2 million barreladay cut in october 2022 us oil output has risen by 610000 barrels a day since those cuts first came into effect while iran an opec member which is bound by the group production targets has used the opportunity to boost its output by 530000 barrels a day the iea said with those supply increases likely to have peaked analysts say the saudi cuts and russias declining oil exports now appear to be having the desired effect tightening the market and lifting oil prices brent crude the international oil benchmark has in recent days risen back above 80 a barrel for the first time since late april the iea said demand for opecs crude is set to exceed the groups supply by 2 million barrels a day this month rising to 3 million barrels a day in august meanwhile oil stocks are declining leaving limited spare barrels to meet demand oil demand is expected to grow by 22 million barrels a day this year to 1021 million barrels a day and expand by a further 11 million barrels a day next year the iea said the iea expects available supplies to lag behind that build in oil demand leading to a sharp 2 million barreladay deficit in the current quarter the iea expects oil supplies to rise by 16 million barrels a day this year to 1015 million barrels a day and increase by 12 million barrels a day next year write to will horner at williamhornerwsjcom