Surprise oil production cuts from OPEC+ should push gas prices higher
Houstonians to see increased prices at pump after OPEC Plus announces surprise cuts in oil productions
If you?ve noticed gas prices on the rise, FOX 26 Business Reporter Tom Zizka explains why you should prepare for more.
HOUSTON - If you've noticed gas prices on the rise, prepare for more after OPEC+ announced a surprise cut in oil production that will further affect prices.
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Saudi Arabia is leading this cut, for the organization, which says it will collectively reduce production by 1.1 million barrels of oil, a day.
The news comes as the average price for gas, in Texas, is $3.15 a gallon, up $0.20 from a month ago.
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Most of that comes from the introduction of more expensive summer blends, lower gasoline inventories, and increased demand. The OPEC cut will make it worse.
"A 1.1 million barrel a day production cut is significant, and I think that would raise oil prices about $5 a barrel," says Houston energy analyst Andy Lipow.
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The move worked immediately, with the price for West Texas Intermediate crude jumping on the news, to close above $80 a barrel. Saudi Arabia, which has a strained relationship with the U.S., announced the biggest cut among member countries at 500,000 barrels a day.
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A kingdom spokesman says the decision is, "a precautionary measure aimed at supporting the stability of the oil market."
"OPEC+ is really concerned about their total revenue," says Lipow, "The banking crisis really caused them to take some action because of fears that that could lead to economic slowdown around the world."
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While banking fears have calmed, somewhat, it's widely believed that OPEC would like to see oil prices closer to $90 to $100 a barrel. That means the cost of driving will only go up from here.
"I expect the OPEC production cut is going to result in Texas drivers paying about $0.15, a gallon, more, averaging around $3.30 a gallon over the next few weeks," says Lipow.
Last Summer, when gas prices were so high, President Biden released a significant amount of oil from the Strategic Petroleum Reserve, which had a marginal effect on prices. The SPR supply is, now, too low for a similar move.
Andy Lipow was already projecting $90 oil, by the end of the year, long before the OPEC+ cut was announced. This latest move should move that number higher.