This week’s surprise oil production cut by OPEC and its allies will push up gasoline prices at a time when the U.S. Federal Reserve is already struggling to bring down inflation without triggering a recession or further chaos in the financial markets. The move also underlines the growing political distance between the United States and the oil cartel’s top producer, Saudi Arabia. By putting the prospect of $100-a-barrel oil back in view after it had dropped to around $70, the production cut reinforces the view that Saudi Arabia—with help from Russia and its other OPEC partners—is striving to regain its position as the dominant force shaping oil prices.
On April 2, the coalition of oil producers known as OPEC+ announced it would cut oil production by 1.66 million barrels per day. That includes a previously announced cut by Russia of 500,000 barrels per day—some of which was likely to drop out of the market anyway because of Western sanctions. Given supply disruptions in Iraq and elsewhere, the actual cut to current global production will be a bit less than 1 million barrels per day.