Bad News for Inflation: How OPEC+’s Latest Move Could Impact You and Drive Oil Prices Toward $100

Hope you enjoyed lower gas prices in recent months — because oil prices might get a lot more volatile in the next few.

On Sunday, OPEC+, a group of major oil producers, cut oil production by over 1 million barrels a day. It was a surprise move as OPEC+ members previously promised to keep levels steady for the remainder of the year.

Why lower production?

Oil exporting-heavy nations may be looking to prop up oil prices — hoping to avoid another ‘08 repeat when a recession led to barrel prices falling from $140 to $45 in under a year.

The group called it “a precautionary measure aimed at supporting the stability of the oil market.”

How does this impact you?

Higher demand from the reopening of China (the world’s largest oil consumer) has already complicated oil forecasts. The OPEC+ move is another headache in the inflation fight — which could lead to more price fluctuation.

• Econ 101: Less supply → higher prices
• Pain 101: Higher prices → higher inflation

And with higher inflation comes the possibility of more rate hikes.

Where are oil prices heading?

Nearly two weeks ago, fund managers had their largest bets (since Nov. 2020) that oil prices would fall lower. With the production cut, many analysts are anticipating $100+ barrels of oil again (nearly 20% rise from current levels).