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Americans should get a breather at the pump this week as renewed Covid-19 fears pushed crude oil prices lower, the AAA said.
“It’s too soon to tell if fears of a global economic slowdown caused by the Omicron variant will push oil prices lower for the long term,” Stephanie Milani, Tennessee Public Affairs Director at AAA - The Auto Club Group, said, as quoted by Fox News. “But for now, the upward pricing pressure due to tightened supply and high demand seems to have abated, and that will likely result in pump prices stabilizing.”
According to Patrick DeHann, GasBuddy’s head of petroleum analysis, the average gas price in the United States could fall to $3.15 per gallon by Christmas from $3.42 per gallon earlier this month, Bloomberg reported.
“For now, the only direction I see in the national average is down,” said DeHaan. “The trend is still that countries are responding by shutting things down; things are not yet reopening,” DeHaan told Bloomberg.
Yet gas prices remain about 60 percent higher than they were a year ago, Bloomberg notes, with crude oil down by just about 16 percent over the past three weeks.
Any more bad news about the new variant of the coronavirus could push crude oil further down, but OPEC+ stands ready to respond to such a development by pausing its monthly output additions, agreed at 400,000 bpd until production goes back to pre-pandemic levels. Currently, OPEC+ is pumping about 3.8 million fewer bpd than it did before the pandemic. According to some analysts, however, it may not have the capacity to boost production by much.
This means that although over the next few months there could be an excess of crude, if demand does not get destroyed by new lockdowns, this could quite quickly reverse with the market swinging into undersupply with little OPEC or anyone else could do to about it.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com