Oil Hits 7-Year High amidst OPEC+ Production Disagreement
Crude oil prices were tracking higher on Tuesday with the US crude benchmark nearing a seven-year peak after the Organisation of Petroleum Exporting Countries (OPEC) and its allies called off a meeting to discuss production plans.
After prices were ruggedly steadied on Monday, there was an increment on Tuesday as investors interpret OPEC+ group joint production disagreement as supply strain.
West Texas Intermediate crude oil futures were 1.6% higher at $76.34 per barrel recently while Brent oil, WTI’s international counterpart, was up by 0.2% to $77.30 per barrel.
The futures prices moved higher after OPEC+, an alliance between the Organization for Oil and Petroleum Exporting Countries and non-OPEC producers led by Russia, cancelled a policy meeting scheduled for Monday, according to a research note from Commerzbank dated Tuesday.
This reportedly came about after the United Arab Emirates “refused to agree to a Saudi [Arabia]-backed deal” to boost output, the note said.
OPEC+ also didn’t agree on a date for its next meeting, Commerzbank said in the research note, citing OPEC Secretary-General Mohammad Barkindo.
OPEC+ alliance included the members of OPEC and 10 non-member nations. The group had slashed production as oil prices plunged last year amid the COVID-19 global outbreak.
RBC Capital Markets said the meetings deadlocked over a plan to lift oil production by 2 million barrels a day between August and December and extend their output deal to the end of 2022.
“With no new meeting date announced, the group will default to the original tapering timeline and the 5.8 mb/d of OPEC+ production cut will remain in place despite an increasingly tight market and rising prices,” RBC strategists said in a note.
The dispute stemmed from a disagreement between Saudi Arabia and the United Arab Emirates.
“This UAE-Saudi dispute appears to be about more than oil policy, with UAE seemingly intent on stepping outside Saudi Arabia’s shadow and charting its own course in global affairs,” RBC’s strategists said.
Oil market sentiment is “very positive” with participants focusing on the supply deficit, Eugen Weinberg, Commerzbank’s head of commodities research, said in a note on Tuesday. But the UAE and other countries might not comply with the agreement after the failure of the talks, and output could increase, he said.
“The continued rise in oil prices may not only weigh on demand because it is brought about by the artificial tightening but may also kick-start non-OPEC production,” Weinberg said. “In the medium term, the failure of OPEC+ is, therefore, more likely to do oil prices harm rather than good.”
Oil Hits 7-Year High amidst OPEC+ Production Disagreement
