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The recent announcement by OPEC and its allies to reduce oil production will inevitably impact gas prices in the US. OPEC+ revealed their decision to cut oil production by over 1.6 million barrels a day starting in May, until the end of the year. This news caused both Brent crude futures and WTI to surge by approximately 6% in trading on Monday.
Gasoline futures also saw an immediate increase due to the production cut, which will be quickly reflected in gas prices for US consumers. RBOB, the leading wholesale gasoline price indicator, rose by about 8 cents per gallon, or roughly 3%, in morning trading.
Our expert, Tom Kloza of OPIS, predicts that US gas prices could rise to $3.80 to $3.90 in the near future as a result of OPEC’s decision. Although he doesn’t foresee prices reaching $5 a gallon, he believes that drivers could soon be paying higher prices compared to the previous year, especially if natural disasters affect production along the Gulf Coast.
Last year, following Russia’s invasion of Ukraine, US gas prices soared to $4.19 a gallon, ultimately peaking at a record $5.02 a gallon in June. Currently sitting at $3.51, gas prices are just below the average of $3.53 on February 23, 2022, before the invasion of Ukraine.
Despite current US oil production and refining capabilities being higher than in the past, compensating for OPEC’s production cut of 1 million barrels a day presents a challenge. Kloza emphasizes that OPEC+ appears determined to reduce production, highlighting the potential impact on gas prices globally.
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