{"id":44886,"date":"2023-08-05T14:28:37","date_gmt":"2023-08-05T18:28:37","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/why-are-gasoline-prices-going-up-saudi-production-cuts-matter\/"},"modified":"2023-08-05T14:28:39","modified_gmt":"2023-08-05T18:28:39","slug":"why-are-gasoline-prices-going-up-saudi-production-cuts-matter","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=44886","title":{"rendered":"Why are gasoline prices going up? Saudi production cuts matter."},"content":{"rendered":"
\n

U.S. gasoline prices have continued to rise this summer, and a production cut by Saudi Arabia aren\u2019t doing U.S. drivers any favors. <\/p>\n

Saudi Arabia on Thursday said it would continue that cut, extending a 1 million barrel-a-day reduction through September, while adding that it could be \u201cextended, or extended and deepened.\u201d The cuts first took effect in July and were already set to run through August.<\/p>\n

\n

\u201cDefinitely this is another\u00a0factor that\u2019s going to push [gasoline] prices up,\u201d said Phil Flynn, analyst at Price Futures Group, in a phone interview, noting that pump prices have been driven up by \u201ceverything\u00a0from refining issues\u00a0to better-than-expected demand.\u201d<\/p>\n

Earlier:<\/strong> Why are gas prices going up again? Brace for further increases, analysts say<\/p>\n

Oil futures bounced Thursday, reclaiming ground lost the previous session after a downgrade of the U.S. sovereign credit rating by Fitch Ratings dented market sentiment. Brent crude
\n BRN00,
\n -0.10%<\/bg-quote>,<\/span>
\n the global benchmark, rose $1.94, or 2.3%, to settle at $85.14 a barrel on ICE Futures Europe. West Texas Intermediate crude
\n CL00,
\n -0.22%<\/bg-quote><\/p>\n

CL.1,
\n -0.22%<\/bg-quote>
\n gained $2.05, or 2.6%, to close at $81.55 a barrel on the New York Mercantile Exchange.<\/p>\n

The impact of Saudi production cuts on U.S. prices isn\u2019t necessarily intuitive. After all, Saudi Arabia accounted for just 7% of U.S. crude imports in 2022, according to the Energy Information Administration.<\/p>\n

But it does matter. That\u2019s because oil prices \u201care driven by global fundamentals, not U.S.-centric developments,\u201d explained Matt Smith, lead analyst for the Americas at Kpler, in a phone interview.<\/p>\n

Saudi Arabia taking an additional 1 million barrels a day off the market tightens the global supply of crude. That means typical buyers of Saudi crude may have to look elsewhere to fill their needs. That puts upward pressure on global price benchmarks like Brent and West Texas Intermediate crude.<\/p>\n

The big cut by Saudi Arabia and reductions by OPEC+ members, including Russia, this summer have been cited as a driver in the rally in crude prices. WTI is up around $15 from its late June lows. A general rule of thumb is that every $10 rise in the price of a barrel of crude translates into a roughly 25 cent increase in the average U.S. gasoline price, Smith noted. <\/p>\n

The move in pump prices has been roughly in line with the average price rising from $3.535 a gallon a month ago to $3.821 a gallon on Tuesday, according to AAA.<\/p>\n

Refinery outages, some tied to extreme heat, have added to the rise in gasoline prices, analysts said.<\/p>\n

Meanwhile, Saudi Arabia\u2019s warning that cuts could be extended or deepened indicated the kingdom\u2019s willingness to sacrifice sales in an effort to hold up prices, Smith said. A pledge by Russia to cut exports by 300,000 barrels a day through September, on top of earlier production cuts, reinforced the message.<\/p>\n

Meanwhile, OPEC+\u2019s embrace of Russia has added to tensions between the Biden administration and Saudi Arabia.<\/p>\n

Now, with U.S. retail gasoline prices rising, \u201cwe expect the energy shuttle diplomacy between Washington and Riyadh to accelerate in the coming months,\u201d said Helima Croft, head of global commodity strategy at RBC Capital Markets, in a note.<\/p>\n

Even with the U.S. Energy Department pausing crude buybacks for refilling the Strategic Petroleum Reserve, \u201cWashington will still have to fall back on the long-running strategy of calling the Kingdom if prices continue to move higher; especially with the election season set to commence in earnest,\u201d she wrote.<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

U.S. gasoline prices have continued to rise this summer, and a production cut by Saudi Arabia aren\u2019t doing U.S. drivers any favors. Saudi Arabia on Thursday said it would continue that cut, extending a 1 million barrel-a-day reduction through September, while adding that it could be \u201cextended, or extended and deepened.\u201d The cuts first took […]<\/p>\n","protected":false},"author":1,"featured_media":44887,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-44886","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nWhy are gasoline prices going up? 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