Saudi Arabia and Russia Will Continue Their Cut of 1.3 Million Barrels of Oil Per Day Through Year’s End

( – Bad news at the pump: Gas prices are set to either hold at current levels or, more probably, increase as both Saudi Arabia and Russia extended their voluntary oil production cuts to the end of the year.

The news that the two major oil producers – who lead the expanded OPEC+ cartel comprised of major oil-producing countries – would continue their lowered production sent crude oil prices past the $90 mark, a first for the year. Saudi will continue decreased production by 1 million barrels daily, while Russia would see production cut by 300,000 barrels per day.

Gas prices continue to hold steady in the U.S. partly due to Hurricane Idalia sparing any major energy infrastructures, and it typically takes a few weeks before global gas prices translate to costs consumers pay at the local pump.

Both countries are ostensibly trying to keep oil prices high, partly due to projections that show a decreased global demand for oil. Russia also has to contend with the costs associated with its continued invasion of Ukraine, while Saudi Arabia need funds to bankroll an expensive modernization program.

The oil production cuts will likely be a point of concern for the Federal Reserve as it works to tame inflation in the United States. Trends point to a downward trend in inflation, a sign that actions by the Fed are working, but an increase in oil prices will require some adjustment to the Fed’s strategy. The U.S. central bank is set to meet within the month to discuss the steps it will take going forward.

Oil prices will also be a critical issue President Joe Biden and his administration will need to keep on top of, especially given next year’s election. Keeping oil prices low would not only benefit consumers, but the government as well, as the Biden administration continues to tout the benefits of its’ “Bidenomics” economic initiatives. Republicans have also often taken to attacking the government’s economic strategy using prices at the pump.

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