The recent surprise decision by OPEC and its allies to reduce oil production will have a direct impact on gas prices in the United States, affecting consumers at the pump. This news was announced by OPEC+, stating that there would be a cut in oil production of over 1.6 million barrels per day starting in May and extending through the end of the year. The announcement caused a 6% increase in both Brent crude futures, the global oil benchmark, and WTI, the US benchmark, during Monday’s trading.
This decision will not only affect the prices of oil but will also lead to an immediate increase in gasoline futures, which will be swiftly felt by US drivers. The wholesale price of gasoline, known as RBOB, rose approximately 8 cents per gallon, a 3% increase, in morning trading. This decision is likely to result in increased gas prices, with the national average already at $3.51 on Monday, as reported by AAA.
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With the current surge in oil prices due to OPEC’s production cut, the inflationary impact on gas prices is concerning. Tom Kloza from OPIS suggested that gas prices could rise to $3.80 to $3.90 in the near future due to this decision. Although hitting $5 a gallon is unlikely, drivers may see prices surpassing last year’s levels, especially if there are disruptions like hurricanes along the Gulf Coast.
While the average gas price currently sits at $3.51, Kloza mentioned that the US’s strategic actions, including planned releases from the Strategic Petroleum Reserve and increased oil production and refining capacity, may help mitigate the impact. However, with OPEC+ cutting production by 1 million barrels a day, the market will face challenges in meeting demand.
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