Oil Mixed As OPEC Fails To Reach Output Agreement

by Ship & Bunker News Team
Friday July 2, 2021

The Organization of the Petroleum Exporting Countries' (OPEC) continued indecision about how to plan proposed output hikes against resulted on Friday in mixed trading for crude - although West Texas Intermediate was on track for a 1.5 percent rise for the week and Brent was largely steady.

OPEC and its allies resumed talks on raising oil output after the United Arab Emirates a day earlier demand a higher than proposed quota; however, observers were left wondering what the outcome would be.

"We're in wait-and-see mode here with OPEC," said John Kilduff, founding partner at Again Capital. "We'll have to see where the Saudis want to come out in terms of holding the group together."

Louise Dickson, oil markets analyst at Rystad Energy, added, "If the alliance cracks and breaks up ... the oil market could plunge into a very similar price crash witnessed when Russia 'left' OPEC+ at the March 2020 meeting and triggered a price war."

Brent on Friday rose 33 cents to settle at $76.17 per barrel, and WTI fell 7 cents to settle at $75.16 per barrel.

The OPEC talks will resume on Monday; the cartel's cuts currently stand at about 5.8 million barrels per day (bpd) and could remain in place if the UAE continues its opposition, thus causing a further spike in oil prices (for the record, the UAE wants to have baseline production set at 3.8 million versus the current 3.168 million bpd).

Meanwhile, Saudi Arabia and Russia want to ease cuts by 2 million bpd by the end of 2021 and extend the remaining cuts to December 2022 from April 2022.

The latest round of OPEC squabbling has rekindled familiar analytical worries that the cartel could soon be rendered ineffectual in a rapidly evolving world market: "The question is whether OPEC+ will remain cohesive and effective next year," said Bob McNally, president of Rapidan Energy, "and that depends heavily on leaders of Saudi Arabia, UAE, and Russia working out an acceptable compromise over UAE's baseline."

Still, OPEC has continued to adjust effectively to supply and demand as the Covid pandemic winds down: a Bloomberg survey showed that its production rose by 855,000 bpd in June to 26.47 million a day as global fuel consumption bounced back, with just over half the increase coming from group leader Saudi Arabia.