OPEC+ has announced a surprise cut in oil production of more than one million barrels per day, abandoning previous assurances that it would maintain stable supply, adding a new risk to the global economy.

This is a significant reduction for a market where supply remains tight despite recent price fluctuations. Futures contracts on oil rose as high as 8% this morning at the opening. As investors hoped for a pause from the central banks due to tensions in the US banking system, this new episode brings inflation back into the spotlight. New inflationary pressures worldwide could force central banks to keep interest rates higher for longer and curb economic growth.

Saudi Arabia led the cartel by proposing to limit its production by 500,000 barrels per day. Other members, including Kuwait, the United Arab Emirates, and Algeria, followed suit. At the same time, Russia said that the production cut it has been implementing from March to June will continue until the end of 2023.

The initial impact of the cuts, starting next month, will amount to about 1.1 million barrels per day. Beginning in July, due to the extension of the current reduction in Russian supply, there will be about 1.6 million fewer barrels of crude per day on the market than expected. Russia had initially decided to cut its production in March in retaliation for Western sanctions triggered by its invasion of Ukraine.

This affair highlights the US’s poor relations with Saudi Arabia. US President Joe Biden made a controversial trip to the region last July but left without any commitments. Then in October, when OPEC+ made a surprise cut of about 2 million barrels per day only a few weeks before the US midterm elections, Biden vowed there would be consequences for Saudi Arabia, but the administration did not follow through.

For its part, Saudi Arabia has embarked on colossal spending to transform its economy, intending to make the country a global tourism and business center. Although much of this spending is being driven by a few sovereign funds that do not directly benefit from the rise in crude prices, government officials have said they will use the surpluses to help accelerate national investments.

Furthermore, reorganizing international relations and strengthening relations with Russia and China has distanced the kingdom from an absent America since Barak Obama’s first presidency. The Iranian-Saudi rapprochement in the summer was a strong demonstration and confirmed a new balance of power in the region.

This turnaround from OPEC+ is also a snub to the Western world, presenting the Ukraine conflict as the fight of the free world against oppression. An image that is largely rejected in the emerging world. The consequences go far beyond the oil market alone. It calls into question Europe’s energy policy, financial pressures on Russia, and the end of the conflict and revives the specter of inflation, which was hoped to be behind us.