OPEC fails to reach deal; oil passes $77

Muscat - Crude oil prices rose above US$77 a barrel for the first time since 2018 after OPEC+ pushed back a contentious summit and failed to reach an agreement on bringing back curtailed output.

Oil prices rose as the United Arab Emirates battled with fellow OPEC members and other producers over the rate and timing of their next output increase.

The rare public dispute led to a summit of OPEC members and ten allies being pushed back to an undetermined date.

North Sea Brent and West Texas Intermediate, the most widely traded crude oil futures contracts, rose to their highest levels since October 2018 after the meeting was postponed. Brent traded 1.16 per cent higher at US$77.05 a barrel, while WTI was up by 1.34 per cent at US$76.17.

The UAE has opposed a proposal by the alliance to raise production, causing a stalemate that could derail efforts to curb rising crude prices amid a fragile postpandemic recovery.

“It's the whole group versus one country, which is sad to me but this is the reality,” Saudi Energy Minister Prince Abdulaziz bin Salman told Bloomberg television, suggesting the UAE was isolated within the 23-member OPEC+ bloc.

Officials have laboured for days over an agreement to pump more as demand picks up with the global recovery and supplies shrink, with fears that failure to find common ground could send prices soaring.

Talks on Monday followed a delay from last week as the Saudis stood firm about raising output starting in August and extending the OPEC+ agreement to the end of 2022, while the UAE sought better terms for itself. The failure by the group to increase supply will further squeeze an already tight market, raising concerns over inflation.

Most OPEC+ members backed a proposal to increase output by 400,000 barrels a day each month from August, and push back the expiry of the broader supply deal to the end of next year. To agree to an extension, the UAE sought to change the baseline that’s used to calculate its quota, a move that could allow it to boost daily production by an extra 700,000 barrels.

UAE has opposed a proposal by the alliance to raise production, causing a stalemate that could derail efforts to curb rising crude prices amid a fragile post-pandemic recovery

London, UK – After failing last week to agree on crude oil output levels, the 23 members of the OPEC+ group of producers called off a meeting planned on Monday to overcome the impasse, a source close to the alliance told AFP. No new date was given for them to reconvene.

Since May, the group has raised oil output little by little, after slashing it more than a year ago when the coronavirus pandemic crushed demand.

At stake is the current proposal that would see the world's leading oil producers raise their output by 400,000 barrels per day (bpd) each month from August to December.

That would add a further two million bpd to markets by the end of the year, helping to fuel a hoped-for recovery in the global economy as the coronavirus pandemic is brought under control.

But that plan risks being delayed or even failing over a further proposal to extend the cap on incremental increases through to the end of 2022.

"The market is now fearing several scenarios," said Bjarne Schieldrop, a Norway-based analyst with SEB.

In one, there is no deal and no increase in production, sending oil prices shooting up, he said. Another sees a "free-for-all (in) production and a collapse in the oil price". The hold-out is the United Arab Emirates, which on Sunday criticised the terms of that extension as unjust.

A video conference between OPEC members and their 10 allies was due to begin at 1300 GMT on Monday, but the meeting was called off a few hours later with no new date set.

Oil prices, which had already been sliding over concerns about the global economy, slumped in April 2020 when the coronavirus spread around the world and battered global consumption, transport and supply chains. OPEC+ decided to withdraw 9.7mn bpd from the market and to gradually restore supplies by the end of April 2022.

The April 2022 deal on capping output now seems too close, and some members want to extend the period until December 2022 – and this is what Abu Dhabi objects to.

No-deal prospects

It was this issue that caused last week's talks to break down. The meetings, more used to big hitters Russia and Saudi Arabia setting the agenda, were confronted with the UAE's refusal to toe the line.

"It is the whole group versus one country, which is sad to me," Saudi Energy Minister Abdulaziz bin Salman told Bloomberg TV.

In a separate interview with Al-Arabiya television aired late on Sunday, Prince Abdulaziz called for "a bit of rationality and a bit of compromise" ahead of Monday's meeting.

Analyst Helima Croft, of RBC Capital Markets, went further. "The prospect of a no-deal outcome – as well as a UAE OPEC exit – has risen materially, even if it has not yet fully entered into firm base-case territory," she wrote.