Oil prices rose on Monday, driven higher after the OPEC+ group of producers again called off talks on output levels, failing in its third attempt to resolve a deadlock on increasing production, and leaving the oil market facing tight summer supplies and rising prices, Reuters, Bloomberg and the Wall Street Journal reported.
Oil prices rose to fresh multiyear highs after the OPEC meeting was called off. Brent BRN00, +0.41% was up 32 cents, or 0.4%, at $ 77.48 a barrel Monday night, trading around 2-1/2 year highs. The U.S. benchmark, West Texas Intermediate crude CL00, +2.05% gained $ 1.50, or 2%, to $ 76.65 a barrel. Thin trading on a U.S. holiday to mark Independence Day added to volatility, analysts said.
OPEC+ ministers on Monday abandoned the talks and set no new date to resume them, after disagreeing last week when the United Arab Emirates rebuffed a proposed eight-month extension to output curbs, Reuters reported.
OPEC and its allies, a group known as OPEC+, agreed on record output cuts of about 9.7 million barrels per day in 2020, taking out the equivalent of about 10% of 2019 global demand, to cope with a price crash that resulted from the global economic recession during the COVID pandemic.
The 23-nation coalition decided to add about 2 million barrels a day to the market from May to July this year, easing output restrictions as demand recovered. On Friday most delegates agreed to a deal to gradually undo the remaining output of about 5.8 million barrels a day by increasing production by 400,000 barrels a day from August to December 2021 and also planned to extend the pact with gradual output rises to the end of 2022, but the proposal was blocked by the UAE, the Wall Street Journal reported.
See also: What’s next for oil prices as OPEC+ deadlocks
At the last minute, the UAE said it would only accept the proposal if it was granted the same terms for calculating its quota as the Saudis. It is haggling over a difference of about 600,000 barrels a day of output and wants its so-called baseline quota to be adjusted to 3.8 million barrels a day from the current allotment of 3.2 million barrels. The UAE said throughout that it would accept the output increase without the deal extension, but the Saudis argued that the two elements must go together.
In recent months, accelerating vaccination drives in the U.S. and Europe have boosted global economic activity. The cartel’s own data show that oil inventories are back down to average levels as the recovery in fuel consumption has resumed. Demand in the second half of 2021 will be 5 million barrels a day higher than in the first six months of the year OPEC forecast, according to Bloomberg.