The recent announcement by OPEC and its allies to reduce oil production will have a direct impact on US gas prices in the near future. This unexpected decision by OPEC+ entails a cut of over 1.6 million barrels per day starting in May and lasting until the end of the year. As a result, both Brent crude futures and WTI experienced a surge of approximately 6% in trading on Monday.
This move by OPEC+ had an immediate effect on gasoline futures, which will quickly translate into higher prices for US drivers compared to the sudden rise in oil prices. The RBOB, a key wholesale gasoline price indicator, rose by about 8 cents per gallon, reflecting a 3% increase in morning trading.
For those concerned about the impact on inflation, Tom Kloza, the global head of energy analysis for OPIS, emphasized that “OPEC is reawakening the inflation monster.” This development will likely raise US gas prices from the current national average of $3.51 per gallon, possibly reaching $3.80 to $3.90 sooner rather than later due to OPEC’s decision.
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Furthermore, Kloza mentioned that while the US may not see gas prices soaring to the levels witnessed in 2022, additional releases from the US Strategic Petroleum Reserve and increased oil production and refining capacity could help stabilize prices. However, compensating for OPEC+’s 1 million barrel per day cut in oil production will prove challenging.
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