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Oil prices continued to rally this week, spurred mainly by OPEC+ production cuts led by Saudi Arabia and Russia, along with faster-than-expected growth in China’s latest industrial output report.
The price for West Texas Intermediate, the U.S. benchmark for the price of oil, was 90.87 per barrel at 1 p.m. Friday, after breaking the $90 barrier on Thursday. The price for Brent crude oil was $94.01 per barrel.
The rally in prices follows nearly three weeks of gains, and last week’s announcement from Saudi Arabia and Russia that they would extend their production cuts through the end of the year.
Floods in OPEC member Libya that killed more than 11,000 people and displaced tens of thousands more have not disrupted oil supply as feared, however. The head of Libya’s National Oil Company on Friday told Bloomberg that the country’s oil export terminals were unharmed and operating normally.
The unusual gap between supply and demand is pushing gas prices higher even as the summer driving season comes to a close.
Auto club AAA reported the national average price for a gallon of regular unleaded gasoline on Friday was $3.87, up from $3.80 a week before and $3.70 one year ago.
California and Washington saw average prices over $5 per gallon on Friday, while Oregon, Nevada, Idaho, Arizona, New Mexico Utah, Montana Colorado and North Dakota all saw prices top $4 per gallon.
“Middle America is feeling the pinch of raised oil prices today,” said personal finance coach Lisa Chastain
Normally, an increase might tighten the household discretionary budget but not stop Americans from engaging in necessary travel. That said, with the rise in inflation across the board from housing to groceries, increased oil prices are hitting harder than usual this fall season. We’ll see how this impacts holiday spending,” Chastain said.
“After what seems like years of dragged-on increases in prices, interest rates, and merchant fees being passed on to the consumer, I don’t know how much more Americans are going to be able to tolerate without something giving,” Chastain said.
“This is a byproduct of not becoming energy independent. When crude oil hits $90 a barrel, production supply tightens, and refineries slow down, consumers will continue to face higher prices at the gas pump,” said Ted Jenkin, founder and CEO of Atlanta-based oXYGen Financial.
“I would expect to see some headwinds in retail spending. With credit card, auto loan, and student loan debt at all-time highs and wages growing slowing than inflation, many families will begin tightening their wallets,” Jenkin said.
According to the International Energy Agency’s August Oil Market Report, deepening OPEC+ production cuts “collided with improved macroeconomic sentiment and all-time high world oil demand.”
The U.S., Brazil, and Guyana led the output growth from non-OPEC+ producers, increasing their exports by 15% year-over-year. The U.S. accounted for nearly 80% of global 2023 supply growth, about 1.2 million barrels per day, the agency said.
TMX contributed to this article.