OPEC+ oil producers have announced further oil production cuts of around 1.16 million barrels per day (mbpd) — fueling greater concerns amid rising inflationary pressures.
Saudi Arabia and other oil-producing giants announced their respective cuts on Sunday, which will come into place from May until the end of 2023.
With global oil prices expected to rise as a result, this is also likely to add further strain on central banks, forcing them to continue their respective rate hikes.
City Index Market Analyst Matt Simpson said the move was met with “prompt” criticism from the US.
“It adds another unwanted inflationary pressure at a time central banks continue to fight high levels of CPI with higher interest rates at the expense of growth,” Mr Simpson said.
The White House said in response to the news that reducing production was inadvisable.
A spokesperson for the White House insisted that Biden’s Administration would continue to work with oil producers to strive for cheaper fuel for consumers across America.
The newly-announced production cuts follow decreases announced in October when Biden expressed the sentiment that there would be “consequences”.
However, this news suggests that nations are moving away from US dollar settlements.
Saudi Arabia vowed to make the biggest cuts to its production, slashing it by 500 million barrels per day (mbpd), with the Kingdom’s voluntary reduction cited as a move to protect the stability of the oil market.
Russia also agreed to decrease its oil production by 500 mbpd.
Other oil producers, including Iraq, the UAE and Kuwait, are to make cuts of 211,000, 144,000 and 128,000 mbpd, respectively.
Oil price outlook
With oil prices reaching a 15-month low in March, prices were rising to almost US$80 (A$120) per barrel on Monday following the announced cuts.
However, in the past, the Nigerian Minister of State for Petroleum Resources Timipre Sylva has said that OPEC+ “wants prices around US$90”.
But in January, OPEC President Gabriel Mbaga Obiang Lima claimed that the group did “not control the price” of oil but instead ensure supply and demand were stable.
Crude Oil is up more than 5 per cent at 1:30 pm AEST, despite dropping 21 per cent across the year.