Russia announced on Monday that it will be cutting its oil production significantly, a move that comes at a time when Saudi Arabia is also restricting its oil output, according to Reuters.
Russian officials declared Monday that they will cut production by 500,000 barrels per day in August, while Saudi Arabian officials have committed to extending their reduction of 1 million barrels per day through at least August, according to Reuters. Monday’s cuts bring the total voluntary cuts announced by the Organization of Petroleum Exporting Countries (OPEC+) to more than 5 million barrels per day, according to Reuters.
Monday’s cuts alone account for about 1.5% of global supply, according to Reuters. The production cuts from the world’s two leading oil exporters have sent oil prices higher amid concerns about a global economic slowdown and potential interest rate increases from the Federal Reserve, Reuters reported. Brent crude prices jumped more than $1 Monday morning as news of the cuts took hold in the markets, according to data from Google Finance.
OPEC+ accounts for about 40% of the world’s crude oil supply and approximately 60% of the global export market, according to Reuters. Prior to Monday’s announcements, OPEC+ had already committed to production cuts amounting to about 3.66 million barrels per day, or about 3.6% of global supply, Reuters reported.
OPEC+’s desire to cut production and boost prices poses a risk to Western economies already grappling with inflationary pressures and volatility in energy markets, according to Reuters. Federal Reserve Chairman Jerome Powell indicated in late June that further interest rate hikes are likely to come until the American economy starts showing more convincing signs that inflation has been brought under control.
President Joe Biden and his administration have had increasingly fraught relations with the Saudi Arabian and Russian regimes. Amid the rising tensions with the key oil exporters, the administration has aggressively pursued an anti-fossil fuel domestic energy agenda.
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