Oil prices soared almost six percent in Asian trade Monday 3rd of April morning after major producers led by Saudi Arabia announced a surprise cut of more than one million barrels per day.

Saudi Arabia led the OPEC+ by announcing 500,000 bpd supply reduction. Iraq, UAE and Kuwait will reduce production by 211,000 bpd, 144,00 bpd and 128,000 bpd respectively. Russia said the 500,000 bpd production cut being implemented from March to June would continue until the end of the 2023.

“The kingdom will implement a voluntary cut of 500 thousand barrels per day from May till the end of 2023 in coordination with some other OPEC and non-OPEC Participating Countries in the Declaration of Cooperation,” Saudi Arabia’s Ministry of Energy stated.

According to the Ministry of Energy, the move is a precautionary measure aimed at supporting the stability of the oil market. This voluntary cut is in addition to the reduction in production agreed at the 33rd OPEC and non-OPEC Ministerial Meeting on October 5, 2022.

The announcement will fan fresh fears about inflation and put more pressure on central banks to hike interest rates further.

The latest reductions could lift oil prices by $10 per barrel, the head of investment firm Pickering Energy Partners said on Sunday.. Now the speculation will move toward whether the US will release more SPR (Strategic Petroleum Reserve) barrels, or not.

The surge in energy costs somewhat overshadowed Friday’s slower reading for core U.S. inflation which had seen Wall Street end the month on a strong note.

S&P 500 futures dipped 0.4% on Monday, while Nasdaq futures lost 0.7%.

The jolt to inflation expectations saw yields on U.S. two-year Treasuries rise 3 basis points to 4.104%, while Fed fund futures pared back expectations for rate cuts later in the year.