The recent announcement by OPEC and its allies to reduce oil production is expected to impact US gas prices. This surprising move by OPEC+ involves a cut of over 1.6 million barrels per day beginning in May and continuing until the end of the year. As a result, Brent crude futures and WTI increased around 6% in trading Monday. This decision will also lead to a quick rise in gasoline futures, affecting US drivers sooner than the spike in oil prices.
With the national average gas price at $3.51 on Monday, this move by OPEC could push prices up to $3.80 to $3.90. Despite this increase, reaching the $5 a gallon mark is unlikely. However, prices could surpass year-ago levels, especially if factors like hurricanes impact production along the Gulf Coast.
The US saw gas prices hit a record high of $5.02 a gallon in June 2022 due to global energy market disruptions. While current prices are below that peak, the recent OPEC decision could bring them closer to those levels. The US can offset some of this impact through releases from the Strategic Petroleum Reserve and increased production capacity, but compensating for OPEC’s decrease of 1 million barrels daily may pose challenges.
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