The latest news of extending voluntary oil supply cuts by Saudi Arabia and Russia have left investors in a state of worry.

On Tuesday Saudi Arabia extended its voluntary crude oil supply cut to 1 million barrels per day and Russia reduced its oil exports by 300,000 barrels per day until December.

As a result, the price of crude oil touched as high as 88$ on Tuesday.

A quick look into who decides the oil prices?

1. OPEC: Formed in 1960, The Organization of Petroleum Exporting consists of members from Middle east, Africa, and South America. They ensure crude oil prices remain stable and a steady flow of income is generated.
2. OPEC+: An organization of oil producing nations that are not a part of OPEC, with Russia being one of the most prominent members. Together with OPEC, they determine the levels of crude oil production.
3. The Role of Saudi Arabia and Russia:
   • Saudi Arabia is the leader of OPEC, but since 2016 Russia has become the most influential non-OPEC member.
   • To make profits, Saudi requires the oil prices to stay above 80$ per barrel.
   • However, since a year the price of oil has been below 83$ leading them to hike prices by cutting out supply.
   • As, a result, lesser the supply higher the price.
   • Also, Saudi Arabia’s crude oil exports in August 2023 were the lowest since 2022.
   • Russia funded their war in Ukraine with revenues generated from Oil exports.
   • Additionally, Russia used crude oil and other energy commodities as economic tools against countries supporting Ukraine.
   Effects on the US Economy
   • Despite the Unites States of America being capable of leading the oil and gas output globally, the Biden administration’s energy policies transferred the power of determining crude oil prices to OPEC+
   • The EIA (Energy Information Administration) report suggests, US faced its biggest decrease in weekly crude oil reserves of -10.584M. The lowest in history.

The significant contributions of Saudi Arabia, Russia have led OPEC+ to hike crude oil prices further.

Crude oil prices have the potential to reach the 93$ mark and sustain for a while, but, if it increases and climbs to 105$-110$, it will disrupt the global markets and pose challenges for the #FED who is actively striving to control and stabilize #inflation.

With rising crude oil price concerns and the upcoming September meeting, how will the #FED react?