Already high gas costs could rise even further as OPEC+ considers cutting production by more than 1 million barrels a day, the largest reduction since the pandemic.
Oil prices rose more than 3 percent Monday morning in early Asian trade to support the market.
Brent crude, the global oil benchmark, fell to $87.96 a barrel last week – the fastest drop since the pandemic began.
The average price of a gallon of gasoline in the US is currently $3.79 per gallon, the AAA reported. The price rose five straight days last week after interest rates set by the Federal Reserve rose to 3.25 percent on fears of a global recession.
Oil prices had fallen for four straight months since June as COVID-19 lockdowns in the biggest energy consumer China hurt demand, while rising interest rates and a strengthening US dollar weighed on global financial markets.
To prop up prices, the Organization of the Petroleum Exporting Countries (OPEC+), which unites OPEC countries and allies like Russia, is considering a production cut of more than 1 million bpd ahead of a meeting on Wednesday, OPEC+ sources told Portal.
America’s gas prices rose to $3.71 for the fifth consecutive week last week, just over a week after the country’s gas prices rose to $3.68 for the first time in almost 100 days, ending an historic streak of declines Marked prices driven by stronger supply and weaker demand for fuel. Average prices are now $3.79 per gallon
A handout photo of President Joe Biden (left) punching Saudi Crown Prince Mohammed bin Salman (right) as he arrived for a meeting in Jeddah, Saudi Arabia, in July
This significant production cut will anger the United States, which has been pressuring Saudi Arabia to keep pumping more to bring down the price of oil. The US is also trying to cut revenue for Russia as the West seeks to punish Moscow for sending troops to Ukraine.
OPEC+ accelerated some production cuts over the summer ahead of President Joe Biden’s visit to Saudi Arabia in July, when he controversially punched Saudi Crown Prince Mohammed bin Salman (MBS) as he arrived for a meeting with the controversial king.
OPEC+ slightly increased its oil production in August but has since worked to reverse those moves.
The OPEC+ meeting takes place on October 5 amid falling oil prices and months of severe market volatility, which prompted top OPEC+ producer Saudi Arabia to say the group could cut production.
If the cut is agreed, it will be the group’s second consecutive monthly cut after reducing production by 100,000 bpd last month.
However, OPEC+ missed its production targets by nearly 3 million bpd in July, two producers group sources said, as sanctions on some members and low investment by others hampered their ability to ramp up production.
“Anything under 500,000 barrels a day would be taken out of the market. As such, we see a significant opportunity for a cut of up to 1 million barrels per day,” ANZ analysts said in a statement.
While prompt Brent prices could rise further in the immediate future, concerns about a global recession are likely to limit upside potential, said FGE, a leading global oil and gas advisory firm.
“If OPEC+ decides to curb production in the short term, the resulting increase in OPEC+ spare capacity is likely to put more downward pressure on long-term prices,” a statement said on Friday.
Adel Hamaizia, a visiting fellow at the Center for Middle Eastern Studies at Harvard University, told The Wall Street Journal that the production cut could push up inflation and further hurt oil demand.
Also on Friday, China announced its biggest quota for exports of oil products this year and increased crude oil import quotas for independent refiners.
State and private refiners can export up to 15 million tons of gasoline, diesel, jet fuel and low-sulphur heating oil, bringing much-needed supplies to global markets to replace Russian exports, which the European Union embargoed in February.
But analysts and traders said some of China’s exports are likely to spill over into early 2023 as refiners will take time to ramp up.
A price board is seen at a gas station in California on September 22. The state average, along with several others, is just under $6 and is up 26 cents at $5.76 after trading at $5.50 on Sept. 21
On Sunday, the sources said the cut could exceed 1 million bpd. One of the sources suggesting cuts could also include a voluntary additional reduction in production by Saudi Arabia.
OPEC+ will meet in person in Vienna for the first time since March 2020.
Analysts and OPEC watchers like UBS and JP Morgan have suggested in recent days that a cut of around 1 million bpd is on the horizon and could help stem the price slide.
“$90 oil is non-negotiable for OPEC+ leaders, so they will act to maintain that price floor,” said Stephen Brennock of oil brokerage PVM.
A new ABC News/Ipsos poll shows that 83 percent of Americans say the economy is either an extremely or very important issue in deciding how they will vote in the 2022 midterm elections — and a majority disapprove of Biden’s handling of economic recovery , inflation and gasoline prices
