Oil prices stabilize following OPEC+ unexpected production cuts

Oil prices stabilized Tuesday after OPEC+ surprised the market Sunday by announced oil production would be slashed by 1.16 million barrel a day.

The announcement resulted Monday in oil prices increasing by 8%, to over $81 a barrel at one point in the day.

However, on Tuesday, West Texas Intermediate, of WTI, a benchmark used by oil markets to representing U.S. production, closed at a comparatively close $81.05.

Bent crude futures (BRN00) showed similar stability, closing at $85.22, after opening at just over the $85 mark. 

The news of production cuts are sure to be a headache for President Biden, who reacted to the production cuts on Monday stating “It’s not going to be as bad as you think.”

Many analysts disagree, fearing Americans could soon again see another spike in gas prices when they head to the pump.

Speaking to The Hill, president of consulting firm Lipow Oil Associates Andrew Lipow, fears gas could rise by 16 cents per gallon, adding that the reason for OPEC+ cuts were likely due to the recent Silicon Valley Bank crash.

“The market … was concerned that a small banking crisis could lead to a big banking crisis and a big banking crisis would lead to a slowdown in economic activity, which negatively impacts oil demand,” Lipow told reporters.

Energy inflation has been a challenge in the White House since Biden’s first days in office.

On January 20, 2021, AAA data estimated the average cost for one gallon of gas was $2.39. Under Biden, gas has spiked as high as $4.86 per gallon in June of last year, and now sits at around $3.51 per gallon, $1.35 cents higher than the day of Biden’s inauguration.

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