OPEC+ is cutting oil production

• OPEC+ group of countries announced its greatest supply cut since 2020.
• Skyrocketing inflation is expected to increase.
• The world’s oil supply is expected to tighten.

After the OPEC+ group of countries announced its greatest supply cut since 2020, fears over skyrocketing inflation are expected to increase as the world’s oil supply is expected to tighten.

The action is taken before the Russian energy embargoes by the European Union due to the conflict in Ukraine.

Just before the busy winter season, the Organization of the Petroleum Exporting Countries (OPEC) and their allies, notably Russia, decided to reduce output by two million barrels per day (BPD).

Following their first in-person conference since the beginning of the COVID-19 outbreak at their Vienna offices, the OPEC+ member states reduced production beginning in November.

The decision, according to the group, was made in light of “the uncertainty that surrounds the world economy and outlooks for the oil market.” Abdulaziz bin Salman, the energy minister for Saudi Arabia, emphasized the group’s claimed mission to protect stable energy markets.

He told reporters, “We are here to remain as a moderating influence, to bring about stability.

According to Abdulaziz bin Salman, the actual supply reduction will be between 1 million and 1.1 million BPD as a result of rising international interest rates and a deteriorating global economy.

Following the announcement, the benchmark Brent crude price increased 1.7 percent to $93.29 per barrel.

The price of Brent was about $79 per barrel at the beginning of the year. Two weeks after Russia invaded Ukraine in March, it climbed past $127, reaching its highest level in 14 years.

Brent levels were at $88.86 at the start of this week; prices had been slowly declining over the previous month due to concerns about a possible worldwide recession.

Since most nations need dollars to purchase their oil, higher oil costs plus a strong US dollar may indicate a challenging situation. The change can raise inflation and living expenses.

Washington’s response to that action was swift and harsh, denouncing the OPEC+ agreement as naive.

US President Joe Biden would continue to consider whether to release additional strategic oil supplies to cut prices, according to the White House.

Saudi Arabia, the United Arab Emirates, and Kuwait are expected to bear most of the cost of the reduction, according to Tilak Doshi, managing director of Doshi Consulting and a former employee of Saudi Aramco.

He added that the actions of OPEC+ were “a smack in Biden’s face” and that relations between Saudi Arabia and Russia appeared to be getting closer.

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