OPEC+ Steps Up Production Cuts, Fueling US Gas Price Hikes
The Organisation of the Petroleum Exporting Countries (OPEC) and its allies announced a surprise move on Sunday, reducing oil production by more than 1.6 million barrels per day starting May and running through the end of the year. The decision was made public just as markets were adjusting to Russia's ongoing invasion of Ukraine, which has been disrupting global energy supplies.
As a result of this change in oil supply dynamics, Brent crude futures increased by about 6% in Monday trading, while WTI rose by roughly the same amount. These price jumps also affected gasoline futures, with RBOB (the most closely watched wholesale gasoline price) surging by approximately 3%. Consequently, prices at US gas pumps are expected to rise.
According to Tom Kloza, global head of energy analysis for OPIS, which tracks gas prices for AAA, the new OPEC production cut "is reawakening the inflation monster." He believes that this move will have a significant impact on US gas prices and predicts they may reach $3.80 to $3.90 per gallon in relatively short order.
Kloza also stated that while US drivers might not see prices surpassing last year's record highs of up to $5 per gallon, there is still the possibility of price increases as early as the summer due to potential storms affecting production along the Gulf Coast.
Historically, OPEC production cuts have had a significant impact on global oil supplies. In 2022, Russia's invasion of Ukraine led to record-high gas prices in the US, which eventually dropped by mid-year. Kloza notes that one key factor preventing current price spikes is that the US plans additional releases from its Strategic Petroleum Reserve and has increased domestic oil production and refining capacity.
However, with OPEC+ now cutting oil supplies, this cushion may not be enough to offset the impact on prices. Kloza believes that the group has the ability to cut production and seems motivated to do so, indicating a potential for continued upward pressure on US gas prices in the coming months.
The Organisation of the Petroleum Exporting Countries (OPEC) and its allies announced a surprise move on Sunday, reducing oil production by more than 1.6 million barrels per day starting May and running through the end of the year. The decision was made public just as markets were adjusting to Russia's ongoing invasion of Ukraine, which has been disrupting global energy supplies.
As a result of this change in oil supply dynamics, Brent crude futures increased by about 6% in Monday trading, while WTI rose by roughly the same amount. These price jumps also affected gasoline futures, with RBOB (the most closely watched wholesale gasoline price) surging by approximately 3%. Consequently, prices at US gas pumps are expected to rise.
According to Tom Kloza, global head of energy analysis for OPIS, which tracks gas prices for AAA, the new OPEC production cut "is reawakening the inflation monster." He believes that this move will have a significant impact on US gas prices and predicts they may reach $3.80 to $3.90 per gallon in relatively short order.
Kloza also stated that while US drivers might not see prices surpassing last year's record highs of up to $5 per gallon, there is still the possibility of price increases as early as the summer due to potential storms affecting production along the Gulf Coast.
Historically, OPEC production cuts have had a significant impact on global oil supplies. In 2022, Russia's invasion of Ukraine led to record-high gas prices in the US, which eventually dropped by mid-year. Kloza notes that one key factor preventing current price spikes is that the US plans additional releases from its Strategic Petroleum Reserve and has increased domestic oil production and refining capacity.
However, with OPEC+ now cutting oil supplies, this cushion may not be enough to offset the impact on prices. Kloza believes that the group has the ability to cut production and seems motivated to do so, indicating a potential for continued upward pressure on US gas prices in the coming months.
. everyone's all worried about the oil prices and how it's gonna affect them 
. but here's the thing - sometimes you gotta let go of control and accept that things aren't gonna go exactly as planned 
. opec's decision is just a reflection of the bigger picture, which is that energy supplies are getting disrupted all over the place 
.
. when unexpected changes come our way, how do we respond? do we get caught off guard and stressed out or do we take a step back, assess the situation, and find a way forward 
? for me, it's all about being present in the moment and trusting that everything is gonna work out in the end 
.
OMG u guys!! OPEC+ is slashing oil production by 1.6 million barrels/day starting May 
! This is gonna make US gas prices SKYROCKET 
!!! I'm talking $3.80-$3.90 per gallon in the summer 
! Not to mention, we could see $5/gallon again if storms hit the Gulf Coast 
! The good news is they're releasing oil from their reserve 
but it's not gonna be enough 
. Tom Kloza said it all - OPEC+ has got this and they're gonna keep the pressure on 
! 
seriously though, $3.80-$3.90 per gallon? that's some serious price inflation 
the good news is that the US has a strategic reserve to tap into, but i guess opec+ just kinda ruined that plan for us 
and now it's just gonna be a bumpy ride at the pump 
just got word about OPEC+ cutting oil production 
it's gonna be interesting to see how this plays out... i'm thinking $3.80-$3.90 per gallon is kinda low for summer tho, especially with those Gulf Coast storms looming 
. And don't even get me started on those summer storms 
... I can already see prices skyrocketing by then.
.
I made a simple chart to show how OPEC's production cuts will affect US gas prices: 
... Kloza seems like he knows what he's talking about, but I still think they're underestimating the impact on drivers 
. And what's up with the strategic petroleum reserve releases and domestic oil production increases? Those sound like some pretty good mitigating factors to me... or are they just trying to greenwash their way out of trouble? Can someone please get me a link to a reputable source on this one?
? and now OPEC+ is cutting oil production too?!