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The global oil market may flip from surplus to deficit with OPEC’s surprise decision to cut production, says Fitch Ratings.

In a new report, the rating agency said that OPEC’s move to cut daily production by 1.2 million barrels starting in May will support oil prices in the short term.

“The decision surprised the market,” pushing Brent crude oil prices from under US$80 per barrel to about US$85/bbl, it said.

The rise in oil prices came despite gloomier global economic prospects driven by the turmoil in the global banking sector.

Fitch said the oil market was in “a moderate surplus” in the first quarter, with inventories rising in both January and February.

“The decision on production cuts increases the likelihood of the market switching into deficit this year,” it said, as demand is expected to increase, primarily due to China’s reopening.

Against this backdrop, Fitch said it now expects prices to average US$85/bbl this year before declining next year.