Thanksgiving leftovers include rising gas prices
After Wednesday’s announcement that the Organization of the Petroleum Exporting Countries (OPEC) had agreed to cut production beginning January 1, 2017, crude oil prices began to rise, directly affecting local gas prices. Nationally, today’s average price of $2.18 per gallon is up five cents per gallon for the week, four cents below the last month and is 13 cents more compared to a year ago.
“Prior to the OPEC agreement, there was speculation that retail gas prices could drop below the $2 mark in some areas,” said Tammy Arnette, Senior Public Affairs Specialist for AAA Mid-Atlantic. “Although demand for gasoline remains relatively flat and inventories have grown over the past few weeks, the path to seeing pump prices at $2 again may take a while longer to reach.”
At the close of Friday’s formal trading session on the NYMEX, West Texas Intermediate (WTI) crude oil closed up $5.62 from last week to settle at $51.68 per barrel. Following OPEC’s announcement to cut oil production worldwide by 1.2 million barrels a day beginning January 1, 2017, markets reacted quickly, with crude oil prices increasing by almost 10 percent. U.S. crude and refined product futures traded higher the morning after the announcement, extending the previous session’s biggest daily price gain in more than 4 years.
The last announced formal production cut took place eight years ago.
OPEC decided to cut oil production in an effort to rebalance the oil market as a result of the glut in the global oil supply that has pressured oil prices lower the last few years. However, it remains to be seen how closely the members of OPEC will follow the proposed rate cuts and how much of an impact that will have on rebalancing the glutted global oil market. Non-OPEC nations that are not voluntarily participating in the agreement will not be cutting back on production and could negate the agreement’s goal. U.S. crude oil production may rev up as well helping replace the reduced oil supply. Meanwhile, the Atlantic hurricane season ended quietly on Wednesday, removing most threats of major storms interrupting production and distribution.
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