Gas prices sink to 2023 lows on weak demand, increased production

Gasoline prices hit their lowest levels of the year on weaker seasonal demand and increased production from refineries coming back online.

The national average for regular driving fuel sat at $3.20 per gallon on Thursday, according to AAA data. The last time gas prices were this low in 2023 was on Jan. 1 at $3.21. 

Government data released this week showed gasoline stockpiles rising by more than 5 million barrels last week versus estimates of 1.3 million.

Prices at the pump are expected to continue declining, shaving off another $0.05 to $0.07 per gallon in the coming week, Andy Lipow, president of Lipow Oil Associates, said. 

"We've seen oil prices slide over the last week, and they're taking gasoline and diesel down with it. So across the board energy is getting cheaper for the consumer," Lipow told Yahoo Finance. 

Drivers in at least 17 states are seeing retail gasoline averages below $3 per gallon. Californians, who pay the most, are paying an average of $4.74 per gallon, down from $5.14 one month ago. 

The cost of diesel, widely used for for transportation, is also lower. The national average sat at $4.16 per gallon, down from $4.39 one month ago, and $5.03 on the same day last year, according to AAA.

For a while U.S diesel was in high demand in Europe, a big consumer of the fuel, following a ban on Russian imports amid the Ukraine war.

“Diesel now is reacting more to additional worldwide supply, especially from startups of refineries in the Middle East that are now able to re-supply [Europe], resulting in less demand for volumes off the US Gulf Coast,” said Lipow.

Crude oil, which is used in refining fuels, also hit its lowest price level since June on Wednesday when West Texas Intermediate (CL=F) fell 4%, settling at $69.38 per barrel. Brent (BZ=F) crude, the international benchmark price, was down more than 3.6%, closing at $74.30 per barrel level.

The declines came despite a deepening of production cuts announced by OPEC+ delegates last week. The oil producers alliance, led by Saudi Arabia, made no mention of additional cuts in its official press release following last Thursday's meeting, leading traders to believe those reductions were voluntary in nature. Each country announced quotas individually.

Since the OPEC+ decision, WTI and Brent prices are down about 8% and 10% respectively.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.