Saudi Arabia’s latest oil production cuts are set to tighten global markets sharply during July 2023 based on data from OPEC.

Even before the kingdom announced its surprise new measures in early June, the Organization of Petroleum Exporting Countries (OPEC) expected that world inventories would deplete rapidly in the second half amid a post-pandemic recovery in fuel demand.

With the 1 million barrel-a-day cutback to be implemented by Riyadh in July — and possibly longer — the shortfall will intensify. World consumption will exceed supplies by roughly 2.7 million barrels a day during July, a June 13 report from OPEC indicated.

Read more: Saudi Arabia to Reduce Global Oil Supply Contributions

If the kingdom opted to extend the reduction for the whole third quarter, it would be the biggest deficit since 2021.

Despite the projected tightness, crude traders have so far reacted with indifference to the new curbs unveiled by Saudi Energy Minister Prince Abdulaziz bin Salman June 4. Brent futures have declined 4% to near $73 a barrel since Riyadh’s plan emerged, as fears over lackluster demand in China take center stage.

The price retreat may be welcomed by the U.S. and other consuming nations, which have condemned OPEC and its allies for stoking inflation by withholding oil supplies. But it could be painful for producers like the Saudis, which the IMF believes needs oil prices above $80 to cover government spending.

OPEC’s 13 members cut supplies during May 2023 by 464,000 barrels a day to just over 28 million a day as they implemented curbs announced in April, according to the report. That’s considerably short of the 29.9 million a day that the cartel estimates are needed in the third quarter, even before the new Saudi cut is applied.

Read more: Europe Gas Prices Soars 20% as Market Shows Signs of Tightening

Once Riyadh goes ahead with the extra 1 million barrel-a-day reduction in July, the shortfall will deepen to roughly 2.7 million barrels a day. Prince Abdulaziz has said he will keep markets “in suspense” on whether the cut will remain in place in later months.

The organization’s forecasts hinge on a significant increase in global demand next quarter, of about 1.2 million barrels a day. For 2023 as a whole, OPEC’s Vienna-based secretariat predicts that consumption will climb by a hefty 2.3 million barrels a day, to average 101.9 million a day.

The International Energy Agency, which advises consuming nations, will release its latest projections for global supply and demand — including its first detailed assessment of 2024 — June 14.