U.S. gas prices could soon rise after Saudi Arabia’s decision to cut oil production by 1 million barrels a day.
According to AAA, drivers are currently paying an average of $3.55 for a gallon of regular gasoline. That is more than $1 lower than a year ago.
Patrick De Haan, GasBuddy’s head of petroleum analysis, said oil prices could rally due to production cuts and push gasoline prices higher as early as mid-week.
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“How long any rise in gas prices lasts is up in the air, but I do not yet believe motorists need to be worried,” he said. “Any rise in average prices should be fairly small, and we’re still extremely unlikely to make a run at record prices anytime soon.”
Saudi Arabia announced Sunday that it would reduce oil production to 9 million barrels per day in July from 10 million barrels per day in May.
The voluntary cut is on top of a broader deal by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia to limit supply into 2024 as the OPEC+ producer group seeks to boost flagging oil prices.
“This is a Saudi lollipop,” Saudi Energy Minister Prince Abdulaziz told a news conference. “We wanted to ice the cake. We always want to add suspense. We don’t want people to try to predict what we do… This market needs stabilization.”
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OPEC+ pumps about 40% of the world’s crude and has cut its output target by a total of 3.66 million bpd, amounting to 3.6% of global demand, including 2 million bpd agreed last year and voluntary cuts of 1.66 million bpd agreed in April.
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Meanwhile, OPEC, including Russia, agreed over the weekend to slash its overall production goals by 1.4 million barrels per day.
Reuters contributed to this report