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us gas prices could eye in summer as oil rally persists

US Gas Prices Could Eye $4 in Summer as Oil Rally Persists

According to the American Automobile Association (AAA), the national average for a gallon of gasoline has surged about 15 percent year-to-date to $3.53. Patrick De Haan, head of petroleum analysis at GasBuddy, says motorists have enjoyed a bit of a break from the latest weekly price hikes. But the country is not out of the woods yet, Mr. De Haan warned. Related StoriesOil and Gas Projects Could Be Blocked Unless They Cut Emissions: Regulator3/27/2024Oil Prices Extend 2024 Rally After Ukraine Strikes Russian Energy Infrastructure3/26/2024 Oil has surged on several factors, including tight global energy markets, geopolitical tensions, and Federal Reserve policy expectations.In DemandAs several major economies are expected to avert a sharp downturn, energy demand worldwide is anticipated to remain solid. U.S. economic growth was better than expected in the fourth quarter, rising 3.4 percent. Moreover, the Federal Reserve Bank of Atlanta’s GDPNow Model estimate suggests 2.8 percent growth in the first quarter. Domestic manufacturing also recorded its first monthly expansion since October 2022. As a result, the Federal Reserve might delay its first cut to interest rates. A chorus of monetary policymakers have insisted that they can afford to be patient because of a resilient economic landscape. However, the futures market is still penciling in three rate cuts beginning at the June Federal Open Market Committee (FOMC) policy meeting, according to the CME Fed Watch Tool. Meanwhile, other countries have recently reported better-than-expected data. Canada narrowly avoided a recession and posted solid monthly GDP readings. Optimism in Japan’s services sector soared to a 33-year high amid strong tourism levels and ballooning profits. European oil demand was more significant than projected.State of SupplyThe latest economic developments could exacerbate tightness, particularly as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, recently extended their voluntary output reductions of 2.2 million barrels per day into the second quarter. A 3D-printed oil pump jack is seen in front of the OPEC logo in this illustration picture on April 14, 2020. (Dado Ruvic/Reuters) Additionally, Reuters noted that Russian Deputy Prime Minister Alexander Novak confirmed that Moscow’s oil firms will concentrate on cutting output instead of exports in the April to June period. His remarks come as Ukraine’s drone attacks have damaged several major Russian refineries, removing approximately 1 million barrels per day of Russian crude processing capacity from the market. As for production, U.S. Energy Information Administration (EIA) statistics for the week ending March 22 show that domestic crude output has stalled at 13.1 million barrels a day. At the same time, gasoline demand is down about 4 percent from the same time a year ago to 8.71 million barrels, and inventories are up roughly 3 percent year-over-year. National drilling activity has also hit a roadblock. The Baker Hughes Oil Rig Count, which measures the number of active drilling rigs, has hovered around 500 since September 2023. “With the global well supply deficit already developing, the increased risk to supplies will keep the market on edge,” wrote Mr. Flynn in an analyst note. “Oil products like gasoline and diesel are starting to bounce back after being skeptical about the move, but the inventories for products around the globe are below average, and that should keep the market well supported on breaks.” Last month, JPMorgan Chase strategists said they think that Brent crude prices could touch $100 a barrel by September. Should this prediction come to fruition, $4 gas might not be out of the realm of possibility this summer.

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