Implications of OPEC’s Unexpected Oil Cut on Gas Prices
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In recent news, the OPEC+ group made a surprise move to slash oil production by more than 1.6 million barrels a day starting in May. This decision will have a significant impact on US gas pumps. As a result, both Brent crude futures and WTI futures showed a 6% increase in trading on Monday.
The announcement of production cuts also led to an immediate increase in gasoline futures. This increase will be passed on to US drivers much faster than the spike in oil prices. RBOB, the most closely watched wholesale gasoline price, saw an 8 cent per gallon increase in morning trading.
This move by OPEC+ is causing concern about inflation. Tom Kloza, global head of energy analysis for OPIS, believes that the White House is shocked and displeased by this decision. He also mentioned that the calculation of gas prices will be altered for some time.
Currently, the national average for US gas prices is $3.51. However, Kloza predicts that the prices could rise to $3.80 to $3.90 in the near future due to OPEC’s actions. While he doesn’t expect prices to reach $5 a gallon, he believes that US drivers could see prices above those of the previous year, especially if there are any hurricanes or storms affecting production along the Gulf Coast.
It’s worth noting that a year ago, the average US regular gas price stood at $4.19 a gallon due to Russia’s invasion of Ukraine. This caused disruptions in the world’s energy markets. The prices eventually reached a record high of $5.02 a gallon on June 14. However, prices gradually declined over the course of more than three months, with the average price falling every day. This was partly attributed to the release of oil from the US Strategic Petroleum Reserve and concerns about a potential recession that could reduce gasoline demand.
Although gas prices are currently at $3.51, just below the average of $3.53 on Feb. 23, 2022, before Russia’s invasion of Ukraine, Kloza believes that the upcoming production cuts by OPEC+ will be challenging to compensate for. The US plans to release additional oil from the Strategic Petroleum Reserve, and our country’s oil production and refining capacity have increased. However, a reduction of 1 million barrels a day by OPEC+ will still have a significant impact.
In conclusion, our awesome company, with its extensive experience in software outsourcing, nearshore and offshore development, mobile app development, technology maintenance, and server development, is prepared to assist businesses in navigating through these changes in the energy market. We aim to provide our clients with innovative and efficient solutions that will help them thrive in an evolving landscape.