The prices of gas surged Wednesday, with the RBOB gasoline rising by more than 5% to reach 1.3752 USD per gallon after opening the day’s trading around 1.2880. USD per gallon. On Thursday, however, the prices had fallen by 3.7% from yesterday’s high and is now hovering around 1.3288 USD per gallon.
U.S. West Texas Intermediate crude also rose by 2.5% to close Wednesday’s session at US$46.54 per barrel, a two-week high while Brent crude went up by 2.1% to end the day’s trading session at US$54.93 per barrel.
Wednesday’s gasoline price surge came after U.S. President Donald Trump compared the fall to a tax cut while raising expectations that this would continue into the rest of the year.
According to Business Insider, the rise in crude oil and gasoline prices occurred as OPEC is expected to announce bigger production cuts than previously anticipated. Already, there are signs that the world’s largest oil exporter, Saudi Arabia, has started reducing oil production.
Data obtained by CNBC reveals that Saudi exports fell last month by around 0.5 million barrels per day. This month, an agreement was reached by OPEC members and ten other oil-producing countries to to reduce oil output by 1.2 million barrels per day.
Besides the output cuts, demand is expected to rise in January in the United States. According to a senior market strategist at the commodity futures brokerage RJO Futures, Phil Streible:
We could see a surge in gas prices with unseasonably warm weather predicted in January and lack of snow which is encouraging people to drive more. Also, OPEC cuts, prospects of the Fed being done with raising interest rates and a recovery in crude oil prices are all helping lift futures.
According to fuel price comparison app GasBuddy, the worst is yet to come with the national average price of gasoline in the United States expected to exceed US$3 per gallon this year. Per GasBuddy’s head of petroleum analysis, Patrick DeHaan, this could be as soon as May:
…While the national average failed to hit $3 last year, we have an even stronger possibility of seeing that ugly possibility, which would push prices in some places from $1.99 today to over $3 this spring- which would be an impressive and shocking turnaround in just a few months.
Featured image from Shutterstock.
Last modified: May 20, 2020 1:02 PM UTC