The Schork Group principal Stephen Schork explained the "fear" causing oil prices to retreat from a 7-year high on "Cavuto: Coast to Coast" on Wednesday, noting that it is "still quite an attractive buy."
Schork pointed out that there has been a "significant run-up" in oil prices over the past month, "mainly on concerns of a supply crunch."
"There was an expectation that OPEC was going to keep the reins rather tight through the end of the summer and this really did invite the buying into the market," Schork told FOX Business host Neil Cavuto.
"Now we have the news that the UAE [United Arab Emirates] has stepped up, does not want to abide, does not want to play by what has been proposed by Saudi Arabia and Russia and now there is the fear that we’re going to get a price war where the UAE wants to monetize, as they said in their words, the billions of dollars they’ve invested in their infrastructure over the last number of years."
He went on to say that oil prices have "significantly" come off the high over the last few days "on this fear that we will get a significant amount of supply" at the end of the summer "when we already passed peak demand."
On Sunday, the UAE pushed back against the OPEC Plus group, which includes non-OPEC producers like Russia. The UAE said it supported a proposed gradual increase in production favored by Saudi Arabia, the group’s largest producer, and by non-member Russia, however, the UAE said it also wanted an increase in its own permitted level of production.
With no new date set for resuming talks, oil markets are left in a state of at least temporary uncertainty about future supply, as demand for fuel continues to recover from the worst of the coronavirus pandemic and the associated lockdowns.
As economies began rebounding from the pandemic and vaccine distribution picked up steam, the OPEC Plus group increased oil production so that daily cuts averaged around 6 million barrels per day.
Currently, the OPEC Plus alliance is producing some 37 million barrels per day compared to around 43 million barrels per day in April of last year, at the start of the pandemic.
OPEC Plus has been meeting monthly to decide whether to increase production, however, two days of talks last week did not produce an agreement. Discussions were expected to resume Monday, however, the session had been called off.
On Wednesday, energy names led the declines for the broader market as West Texas Intermediate crude slipped by 1.9% to $71.99 per barrel.
According to a AAA news release, the national gas price average increased about 40% since the start of the year, from $2.25 on January 1 to $3.13 on Tuesday.
AAA warned that drivers can expect gas prices to increase another 10 to 20 cents through the end of August, bringing the national average to more than $3.25 this summer.
Jeanette McGee, a AAA spokesperson, attributed the rise in gas prices to "robust gasoline demand and more expensive crude oil prices."
Schork said that the Schork Group’s "probabilistic modeling gives a 70% chance that oil prices will range between $78 and $68 through the end of the month."
"So that does translate into about another 10 cents when you look at the historical correlation between crude oil prices and gasoline at the pump," he continued. "So this could potentially bring gasoline prices by the end of the summer to that $3.20, $3.30 range."
Schork acknowledged that the range is in fact expensive, adding that "adjusted for inflation over the last two generations, it’s still quite an attractive buy."
The last time crude was more than $76.40 was in November 2014 and the last time the national average was at $3.25 was in October of that year, according to AAA.
FOX Business’ Daniella Genovese, Jonathan Garber and The Associated Press contributed to this report.