U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading at their highest levels since 2018 after OPEC and its allies called off production hike talks. The group was expected to agree to a 2 million barrel per day output hike on July 1, but negotiations stalled when the United Arab Emirates (UAE) rejected a proposed eight-month extension to output curbs.
OPEC+ Abandons Oil Policy Meeting after Saudi-UAE Clash
OPEC+ ministers called off oil output talks on Monday after Saudi Arabia and the UAE failed to come to terms on the length of proposed output curbs. This meant there was no deal to boost production starting August 1.
Saudi energy minister Prince Abdulaziz bin Salman had called for “compromise and rationality” to secure a deal after two days of failed discussions last week.
But four OPEC+ sources said there had been no progress. OPEC’s Secretary General Mohammad Barkindo said in a statement on Monday the meeting had been cancelled, without a date for the next one being agreed, according to Reuters.
Some OPEC+ sources said there would be no oil output increase in August, while others said a new meeting would take place in the coming days and they believed there will be a boost in August, Reuters reported.
“There is no decision about August and discussions still continue. The market needs that oil,” one source familiar with the talks said.
The failure of the talks, which had partly been about an increase in oil output from next month, is helping to drive up WTI and Brent crude oil prices on Tuesday.
Crude oil buyers in Asia are concerned that an unexpected cancellation of an OPEC+ meeting to discuss a rise in output could drive prices even higher and hurt their margins.
They are now awaiting Saudi Arabia’s official selling prices (OSPs), which were delayed until after the OPEC+ meeting and set the tone for prices of a majority of Middle East crude sales to Asia, to assess the oil market’s direction.
In the absence of clarity, crude oil traders could be facing a mountain of volatility with some traders questioning whether OPEC+ can survive due to the growing divergence between Saudi Arabia and the UAE.