Analyst argue about what's in store for the market: File Image/Pixabay
While crude traders in the previous session viewed the Organization of the Petroleum Exporting Countries' (OPEC) output talks stalemate as a sign there's no deal to boost production, on Tuesday they worried that no deal could trigger massive output hikes - and as a result, oil prices tumbled 3.4 percent.
With no apparent cause triggering the fear other than sentiment, Brent on Tuesday settled down $2.63 per barrel, or 3.4 percent, to $74.53; West Texas Intermediate settled down $1.79, or 2.4 percent, to $73.37.
Bob Yawger, director of energy futures at Mizuho, remarked, "The market is concerned that the United Arab Emirates will step in and unilaterally add barrels and other people in OPEC will follow suit."
Bart Melek, TD Securities
I suspect cooler heads or rational thinking will prevail
The UAE was responsible for causing OPEC to cancel the output talks, after saying it would agree to proposed output increases but not a separate proposal to extend curbs to the end of 2022 from an existing April deadline.
The fact that OPEC hasn't rescheduled its meeting worries crude oil buyers in Asia: a Singapore-based trader told media, "The OPEC no decision and resulting high price will have short-term negative impact on Chinese refiners, as they will see margins pinched due to often lagging domestic fuel prices.
"That could force them to cut runs, which should lift margins again and bolster their crude oil buying."
Tuesday saw a host of theories about what course the market would take in the wake of the OPEC stalemate: John Kilduff, founding partner at Again Capital, said, "You'll see more oil produced: they're not going to go crazy, but they're not going to live within the current structures, [and] Russia will lead the charge."
He added that volatility is "going to get worse before it gets better: I still think $85 to $90 per barrel should be the upper end" - a prediction echoed by Goldman Sachs.
Andy Lipow, president of Lipow Oil Associates, said, "I think as prices creep up, one of the things [OPEC+ members] are worried about is a spike higher that would encourage lots of drilling in other parts of the world."
But Bart Melek, global head of commodity strategy at TD Securities, argued that OPEC members won't be tempted to pump all-out: "Realistically, I don't think anybody wants to go this way; I suspect cooler heads or rational thinking will prevail."
The White House on Tuesday said there have been a number of conversations with officials in Saudi Arabia, the UAE, and other partners.