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The recent surprise announcement by OPEC and its allies to slash oil production is expected to impact US gas pumps soon. OPEC+ has decided to reduce oil production by more than 1.6 million barrels a day from May through the end of the year. This move has caused both Brent crude futures and WTI to increase by about 6% in Monday trading.
The immediate effect of this production cut has been seen in gasoline futures, with RBOB, the key wholesale gasoline price, rising by 8 cents per gallon in morning trading. Analysts believe that US drivers will experience this increase at the pump sooner rather than the rise in oil prices.
As quoted by Tom Kloza, the global head of energy analysis for OPIS, “I think OPEC is reawakening the inflation monster.” The national average for US gas prices currently stands at $3.51 per gallon. Kloza anticipates that this price could climb to $3.80 to $3.90 due to OPEC’s decision.
While we may not see prices soaring to the record levels of 2022, factors like hurricanes or production disruptions along the Gulf Coast could push gas prices higher by the end of the summer. Despite additional releases from the US Strategic Petroleum Reserve and increased US oil production, the 1 million barrel cut by OPEC+ may still pose challenges in meeting demand.
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