The Organization of Petroleum Exporting Countries and Russia announced they would extend oil production and export cuts on Sept. 5.

The announcement stated that the Kingdom of Saudi Arabia would extend the cap of one million barrels of oil per day until the end of the year and that the cuts are to “reinforce the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil markets.”

Additionally, Alexander Novak, Deputy Prime Minister of Russia, said that Russia would “extend an additional voluntary reduction in oil supplies to world markets by 300 thousand barrels per day,” totaling the supply cut in oil to 1.3 million barrels per day.

Following the extension, crude oil prices rose to $90 for the first time this year and stayed relatively stagnant. Crude has remained stagnant, hovering under pre-war levels seen during the invasion of Ukraine by Russia, when prices exceeded $120 per barrel.

Bob McNally, president of Rapidan Energy and former energy adviser to the Bush administration, told The Financial Times that sharp economic downturn and supply cuts “will drive deep deficits into the global oil balances and should propel crude oil prices well above $90 per barrel.”

Conditionally, diesel prices have skyrocketed 40% since the supply cuts went into effect back in May, causing analysts to expect complications in taming inflation due to diesel’s widespread use in the transportation of goods.

“It’s used in the delivery of everything in the last mile,” Alan Gelder, vice president of refining chemicals and oil markets for Wood Mackenzie, told The Wall Street Journal. “High diesel prices mean delivery costs to supermarkets and other shops are high. It makes inflation more sticky.”

As demand exceeds the supply of oil produced, some worry that supply cuts could lead to higher interest rates due to stagnant or increasing inflation.

“We have extraordinarily high demand in fact, this summer, the world experienced the highest global oil demand; we’re now using about 102 million barrels a day,” Carolyn Kissane, associate dean at New York University’s Center for Global Affairs, told CBS News. “And there is a connection to interest rates and there’s concern that these higher oil prices will lead to an increase in interest rates to sort of curb inflation. And as we know, there’s been a move by the Fed to try to sort of calm inflationary pressures and allow the United States to have a soft landing.”

Analysts were surprised by the cuts, with most only expecting an extension of one month instead of the end-of-the-year extension, causing many to turn to the White House’s response. 

“However, I think it’s important to note that there is a difference between Russia and Saudi Arabia; it may be something Moscow’s very happy to do, i.e., inflict pain on Joe Biden,” Bloomberg’s Paul Wallace said on an episode of Bloomberg News. “But when it comes to Saudi Arabia, the White House has actually been trying and succeeding in a lot of ways at improving ties with the kingdom since October, really and to me, it wasn’t a surprise that the White House was quite muted in its response to yesterday’s move.”

Dan Pickering, chief investment officer at Pickering Energy Partners, noted that this supply cut proves how committed Saudi Arabia is to higher prices and that “the floor price for crude is moving higher.”