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US gas prices may drop to $3 or less by November: Analyst

Oil prices are set for a weekly loss amid lingering concerns surrounding future fuel demand. OPIS Global Head of Energy Analysis Tom Kloza joins Catalysts to discuss the next OPEC+ gathering and macro trends in the energy industry.

Kloza notes that the consensus view of the June OPEC+ meeting is that the organization will roll over production cuts through another quarter or the end of the year. He adds that OPEC+ must take this action because the oil market has become "sloppy," with too much oil supply impacting gasoline demand.

Gas prices have dropped by as much as a dollar per gallon in the last 40 days, but retailers haven't necessarily passed those savings along, Kloza adds. Oil and gas prices may also surge by August, given greater hurricane threats in the Gulf of Mexico. However, in the last quarter of the year, Kloza projects that gas prices may drop to $3 or less per gallon in most parts of the US.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

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This article was written by Gabriel Roy

Video Transcript

Well, oil prices are set for a weekly loss amid lingering concerns surrounding future fuel demand.

And while traders also look ahead to the OPEC Plus output policy meeting in June here to discuss this and more.

We've got Tom Kloza who is the global head of energy analysis.

Tom, great to have you here with us and, and thanks for joining the show first.

A as we think about what the discussion might be at this next meeting here.

What are you gonna be watching for most notably at this next OPEC Plus gathering?

Well, I the consensus view is that they're gonna roll over their production cuts through another quarter, maybe through the end of the year.

I I would submit that they need to do that or they need to do more because the oil market has become very, very sloppy in the last month or so.

The structure of the market seems to indicate uh that there's a little bit too much oil and you know, it's been disappointing gasoline demand uh in the United States running about 1.5 or one point uh and three quarters percentage behind last year.

So Tom, what does that then tell us just about the likely pricing action ahead and then when that's going to trickle down to the price of gas that so many consumers are paying right now, you know, I sha I actually, we've seen gasoline prices drop by as much as a dollar a gallon in the last uh, 40 days or so, but the retailers haven't necessarily passed that along.

So you've seen a transfer of wealth from refining companies to marketing companies.

And uh it's really a good time to be selling gasoline at the pump for investors that are trying to game out how they can play the oil and, and energy landscape.

How should they be kind of executing their strategy?

Given some of the macro factors that you just mentioned?

Well, you know, the big thing that's gonna happen this summer is gonna be weather, June, July and August.

I mean, if we get hurricane threats in the Gulf of Mexico, the Gulf of Mexico is now the second most crucial choke point in the world.

So I, I would submit that probably by August, we'll see stronger oil prices and gas, gasoline prices.

The problem will be in the last 100 days of the year.

It's a lot easier to make gasoline.

There's a lot more crude coming on from Guyana, Brazil, Canada and the United States.

So, uh I, I think they're ok for the next 90 days.

I think that oil starts to get tested.

And, and flirts with some, uh, lower numbers really in the last quarter of the year.

How much lower Tom?

Uh, I think that probably most parts of the United States by election day and it has nothing to do with the election will be, uh, flirting with $3 or less.

Interesting.

Ok. And so, I mean, that really cascades into the mind of the consumer and where consumers are looking across gas prices, looking across some of the most cyclical purchases that they make and the ones that they can't afford not to.

So ho how does that play into the consumer sentiment and, and mindset as well here where we're getting a fresh reading on that today, longer term.

If we do hit some of the targets that you're tracking, I think the consumer doing pretty well and gasoline doesn't really alter it too much.

Now, if you're in western states where you got $5.50 it's a little bit different.

But, uh, you know, it's more mythical than real, this notion of a driving season that begins this week.

And, uh, I think it'll have a lot to do with the cost of hotels and the cost of eating out.

That's where inflation is still rearing its ugly head.

Gasoline prices probably the fourth most expensive Memorial Day weekend ever, but really nothing, uh, compared to sort of the 2022 numbers where we are around $5 it's national average Tom Kloza, OPEC, Global Head of Energy Analysis.

Tom, thanks so much.

Great to see you.

Uh Nice to be here.

Have a good weekend.

You too.