Implications of OPEC’s Unexpected Oil Cut for Gas Prices

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The recent announcement by OPEC and its allies to slash oil production will have a direct impact on US gas prices. OPEC+ has declared that they will cut oil production by over 1.6 million barrels per day starting in May and continuing until the end of the year. This news has caused both Brent crude futures and WTI crude futures to increase by approximately 6% in trading on Monday.

The effects of this production cut announcement will be felt much quicker in gasoline prices than in the spike in oil prices. Gasoline futures, specifically RBOB which is closely monitored, has already increased by about 8 cents per gallon or 3% in morning trading.

Experts believe that this move by OPEC is reawakening the inflation monster and altering the calculus for the White House. Tom Kloza, global head of energy analysis for OPIS, predicts that the national average for US gas prices, currently at $3.51 per gallon, could quickly rise to $3.80 to $3.90 as a result of this decision.

It is unlikely that gas prices will reach the record levels of $5 a gallon seen in 2022. However, if there are any hurricanes or storms affecting production along the Gulf Coast, US drivers could experience prices above last year’s levels. In 2022, gas prices reached a record high of $5.02 per gallon due to Russia’s invasion of Ukraine.

Kloza believes that the US’s additional releases from the Strategic Petroleum Reserve and increased oil production and refining capacity will help prevent gas prices from reaching those record levels. However, compensating for a 1 million barrel per day production cut by OPEC+ will not be easy.

Overall, we can expect the recent oil production cut by OPEC+ to have a significant impact on US gas prices. As an awesome company specializing in software development, we understand the importance of staying up to date with the latest market trends and developments. With our expertise in software outsourcing, nearshore and offshore development, mobile app development, technology maintenance, and server development, we can help businesses navigate through these changes and optimize their operations.