OPEC and its allies have made a surprise announcement to reduce oil production, which will soon impact US gas prices. This move by OPEC+ to cut oil production by over 1.6 million barrels a day from May through the end of the year has caused Brent crude futures and WTI to surge about 6% in trading Monday. Gasoline futures have also been affected, with the RBOB price jumping approximately 8 cents a gallon in morning trading.
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Tom Kloza, global head of energy analysis for OPIS, has expressed concerns about potential inflation due to this decision. He suggested that US gas prices currently at $3.51 could quickly rise to $3.80-$3.90. Kloza also mentioned the possibility of prices surpassing last year’s levels by the end of the summer, especially in the event of any production disruptions caused by hurricanes or storms along the Gulf Coast.
In comparison, at $3.51, current US gas prices are slightly below the $3.53 average on Feb. 23, 2022, just before Russia’s invasion of Ukraine. Despite the increase, Kloza pointed out that prices are not expected to reach the record highs seen in 2022. The US has plans for additional releases from the Strategic Petroleum Reserve, and both oil production and refining capacity are on the rise, helping to stabilize prices.
However, the cut in oil production by OPEC+ poses a challenge in compensating for the reduced supply. Kloza emphasized the motivation of OPEC+ to enforce production cuts, indicating a potential increase in gas prices in the upcoming months.
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