The surprise move by OPEC and its allies to reduce oil production will soon be felt at US gas pumps.
The group known as OPEC+ announced this on Sunday cut oil production More than 1.6 million barrels per day starting in May through the end of the year. The news sent both Brent crude futures, the global oil benchmark, and WTI, the US benchmark, up nearly 6% in Monday trading.
The production cut announcement also had an immediate impact on gasoline futures, which would be passed on to US drivers more quickly than a rise in oil prices. RBOB, the most closely watched wholesale gasoline price, was up about 8 cents a gallon, or about 3%, in morning trading.
“I think OPEC is reawakening the inflation monster,” said Tom Kloza, global head of energy analysis for OPIS, which tracks gas prices for AAA. Should be It definitely changes the calculus for a while.
The national average of US gas prices on Monday was $3.51, according to AAA. Cloza said he could get it to $3.80 to $3.90 in a relatively short period of time thanks to OPEC’s move.
“We’re not going back to $5 a gallon. I don’t think we’re going to even go back up to $4,” he said. But he said U.S. drivers could be back above year-ago prices by the end of the summer, especially if a hurricane or other storms affect production along the Gulf Coast.
The average US regular gas price was $4.19 a gallon a year ago in the wake of Russia’s invasion of Ukraine and disruption to world energy markets. prices eventually reached a Record $5.02 per gallon on June 14before starting a slow but steady decline over three months during which average price fell every day, The decline was partly driven by the release of oil US Strategic Petroleum ReserveAnd partly out of concern that there could be a US or global recession that has reduced demand for gasoline.
Even at $3.51, US gas prices were well below their average of $3.53 on February 23, 2022, the day before Russia’s invasion of Ukraine.
Kloja said that one thing keeping prices from anywhere near record levels for 2022 is that the US is planning additional releases from the SPR, and US oil production and refining capacity are both up. But getting OPEC+ to cut oil by 1 million barrels a day won’t be easy.
“They have the ability to cut production and they are motivated to do so,” he said.