Better-than-expected demand and a series of supply disruptions are bolstering oil prices as OPEC cuts output and U.S. energy sanctions bite.
Oil prices are rising faster this year than many energy analysts expected, leaving many consumers to wonder how much further their gasoline bills will jump.
"There's no fooling motorists, gas prices have continued to surge," said Patrick DeHaan, head of petroleum analysis for GasBuddy.com. "Everybody came into the year with a very negative view and actually demand has been resilient," Michele della Vigna, co-head of European equity research at Goldman Sachs said on Wednesday.
Those policies have shrunk supply and left the market with less cushion to absorb unexpected supply disruptions — which have been plentiful in recent weeks. In the U.S. alone, disruptions have included flooding across the Midwest, refinery fires and a blaze at a Texas petrochemicals storage facility that disrupted traffic in the Houston ship channel.
The key questions moving forward are whether the so-called OPEC+ alliance will extend its output cuts for another six months in June and how much the U.S. will tighten sanctions. Analysts generally think the Trump administration will allow several countries to continue buying Iranian crude when their special permissions expire in a month, preventing a spike in oil prices. But U.S. officials keep threatening to cut Iran's shipments to zero, raising concerns that hawks within the administration will convince President Donald Trump to strip China, India, and other importer nations of the sanctions waivers.
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