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Treasury Secretary Janet Yellen reportedly said the surprise OPEC+ oil production cut is an “unconstructive act” that will add uncertainty to the global growth outlook and burden consumers when inflation remains high.
What Happened: “I think it’s a regrettable action that OPEC decided to take,” Yellen told reporters, according to a Reuters report. She also said it was too early to assess what the price impact would be.
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Yellen pointed out that a decline in gasoline prices from last year’s peaks had helped rein in inflation and it would be detrimental if the trend were reversed, according to the report.
“Clearly, it’s not a positive for global growth,” she said. “And it adds to uncertainty and burdens at a time when inflation is already high”.
Price Action: Oil prices soared on Monday after the OPEC+ trimmed oil production by 1.16 million barrels per day beginning May, in a surprise move.
West Texas Intermediate (WTI) futures expiring in May were trading higher by 0.5% at $80.82 per barrel during Tuesday morning Asian trade while Brent futures expiring in June were trading 0.47% higher at $85.33 per barrel at the time of writing.
The United States Oil ETF (NYSE:USO) had closed 5.76% higher on Monday while the Energy Select Sector SPDR Fund (NYSE:XLE) ended 4.53% higher. Other ETFs that recorded gains include Vanguard Energy Index Fund ETF (NYSE:VDE), SPDR S&P Oil & Gas Equipment & Services ETF (NYSE:XES) and Invesco S&P SmallCap Energy ETF (NASDAQ:PSCE).
Price Cap: Asked about the impact the production cut would have on the $60 per barrel price cap imposed by Western governments on Russian crude, Yellen said she did not see any significant impact on the appropriate level of the price cap.
“I see it as working,” Yellen stated about the price cap, while also noting that it has led to steep discounts on Russian oil and increased bargaining power for purchasers. The Treasury Secretary also said she does not see revisiting the price cap as appropriate at this time.
