Expect to pay more at the pump if oil prices stay at current levels. Crude futures are trading about $5 higher per barrel after OPEC+ announced a surprise cut in production.
The average cost of gasoline in the U.S. is currently $3.51 per gallon, according to AAA.
“We should expect it to continue ticking higher here in the next month or two, perhaps heading toward that $4 a gallon level there. So in summary, higher prices basically,” Matt Smith, lead oil analyst at Kypler, told Yahoo Finance Live.
“As we know, with prices at the pump—they shoot up like a rocket but float lower like a feather. And so this is going to provide a bump at the pump essentially,” he added.
While higher prices are expected, its unlikely they’ll go near the record $5.01 per gallon reached in June of last year.
“Gasoline and diesel prices are expected to rise 12 to 15 cents per gallon,” forecasts Andy Lipow of Lipow Oil Associates. “I expect prices to rise to my previous February 20th price forecast of $3.65 as we head into the summer driving season. I don’t expect a repeat of last summer’s price surge to $5 per gallon.”
West Texas Intermediate (CL=F) oil was hovering around $80 per barrel on Tuesday, after gaining more than 6% in the prior session.
Brent (BZ=F) futures are trading just below $85 per barrel. The OPEC oil cartel’s surprise production cut of 1.157 million barrels per day along with Russia’s 500,000 bpd reduction extended through the rest of the year has prompted Wall Street analysts to lift their end of year target on oil.
Goldman Sachs Commodities Research analysts increased Brent forecasts by $5 to $95 per barrel for December 2023, and $100 for December 2024, up from a prior $97 forecast.
Capital Economics analysts also raised their price target stating “we have revised up our end-2023 Brent forecast to $90 per barrel ($85 previously). Nonetheless, this forecast does not rule out bouts of price weakness as advanced economies enter recession between now and then.”
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre
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