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Gasoline prices could stick through labor day: Analyst

Bob Iaccino, Path Trading Partners Co-Founder and Chief Market Strategist & The Stock Think Tank Co-Portfolio Manager joins the Yahoo Finance Live panel to discuss oil edging lower as the U.S. pushes OPEC to pump more.

Video Transcript

AKIKO FUJITA: Welcome back to Yahoo Finance Live. We are seeing WTI and Brent crude trading lower in the session right now, with WTI below that $70 a barrel handle, Brent crude at $73 a barrel right now. Refining operations, the oil production remains shut down in the Gulf of Mexico, as the region digs out of Hurricane Ida. Some analysts saying the storm is likely to increase gas prices heading into the Labor Day weekend.

For more on the price action, let's bring in Bob Iaccino, Path Trading Partners co-founder and chief market strategist and the Stock Think Tank co-portfolio manager. That's a long title, Bob, but it's always good to have you on. Walk me through your assessment right now, the fallout from Ida, how bad the damage was, and how quickly things are likely to come back online.

BOB IACCINO: Yeah, good afternoon. Thanks for having me again. I think when you're looking at gasoline versus crude oil and natural gas, for that matter, you're looking at three different scenarios. Really, the crude oil production is likely to come online much quicker. And the interesting part about crude oil is, it's a smaller subsector of product that's affected by this particular hurricane.

Refineries are another story. There's sort of a two-tiered thing here where the refineries not only have to reopen, they have to get their staff back. The crude oil production much more prepared for that. But also, we're entering that sort of symbolic end of the summer driving season. You mentioned the Labor Day holiday. And generally, that leads us to refinery turnaround, anyway.

So a lot of the refineries might actually take advantage of the slightly lower demand that's coming to enter that refinery turnaround as they're shut down at this point anyway. So I think you're going to see the refineries turn around and reopen at a much slower pace than crude oil production will. Same thing with natural gas. They'll sort of be in the middle of the two. And you're likely to see those higher gasoline prices stick throughout that Labor Day holiday. But crude oil might actually dip.

AKIKO FUJITA: What kind of spike are we talking about-- $0.05 to $0.10?

BOB IACCINO: Yeah, somewhere in that range. You could see it go as high as $0.15 in different areas, especially down near where the hurricanes actually affected. You might think that the refinery product gets to that area quicker, but it's actually the opposite, because there were shipments that were already on the way to other areas. One of the things the refineries do as they prepare for a hurricane is they send out gasoline to the further outreaches that they need to send it out to. So you might actually see it somewhere in, say, Texas, Louisiana, southern states, be a little bit higher, maybe somewhere in that $0.15 range.

Having said that, you've got an OPEC meeting tomorrow, which can add to the downward pressure specifically on crude oil. And then the refinery utilization figures are going to be critical because they were already flat anyway. And if they stay flat this particular week or even creep up a little bit because it's not a hurricane affected number, then you'll see that maybe a little bit of extra product was pushed out to kind of ease those price hikes.

AKIKO FUJITA: What are you anticipating out of the OPEC meeting? We've got the US calling to pump more oil, essentially, to meet the demand. How likely do you think that it is that OPEC going to increase production?

BOB IACCINO: I think the reaction over even the last five to six years by OPEC and OPEC Plus has been more about lip service and less about actual production in response to US pressure. When we look at the oil that actually comes out, you have to see there's two things that oil traders and producers and hedgers will look at-- what they say they're going to do and what they actually do on the ground, the kind of compliance they get, not only from other members, but it's almost kind of like a wink-wink kind of a thing. We're going to increase production. Then they don't. They lower prices while they decrease production, et cetera. It's all about market share for them.

I think they'll probably agree to the price-- or I'm sorry-- the production hike that they said they would, which was the 400,000 barrels. But I think they'll drag it on because demand has really been slow. And when you include, for example, some of the PMI numbers we saw out of China this morning, the Chicago PMI numbers we saw this morning, the talk of tightening in the EU by Robert Holzmann from the ECB, they're probably looking at a situation of potentially lower demand going forward. So they could cut that back a little bit. Generally, OPEC does not do what they're expected to do.

AKIKO FUJITA: And finally, Bob, you mentioned, you know, Labor Day weekend, this being the end of summer, demand sort of dropping off a bit. But we're also in the thick of hurricane season. And there's a lot of concern, especially given these extreme weather events we've seen already. You're looking at what happens in Louisiana, the worst hurricane to hit in years. This is kind of right along the oil patch in the US. Are we likely to see things get a little choppier here, especially given the weather events in terms of the price action we're likely to see on the back of that-- the impact?

BOB IACCINO: Well, we always do. I actually live in this area. I live in Southwest Florida. So the Gulf of Mexico is warmer than it's been in quite some time, which adds strength to these storms. And we've got not only two months left in the official hurricane season, but the two worst months, with the warmest weather we've seen in a while. So volatility is to be expected. Crude oil is the most volatile tradable product prior to the advent of the cryptocurrency space, anyway.

And as global warming and climate change gets worse in this area, the hurricanes are going to be stronger and more frequent. We're already on a record pace for named storms. I expect that to continue. So you're always watching for that. That's where the price spikes are likely to come from, not necessarily from a fast increase in demand.

AKIKO FUJITA: Bob Iaccino, always good to talk to you, Path Trading Partners co-founder and chief market strategist.