The inability of the Organization of the Petroleum Exporting Countries and allies (OPEC+) to meet today to conclude on the decision as to whether or not to extend output cuts by 8 months, has caused oil futures to trade at new highs.
Brent oil futures is trading at $77.16 a barrel, up 1.30% while U.S oil, WTI futures is up 1.57%, trading at $76.34 a barrel for the day as of the time of writing this report.
Javier Blas, Chief Energy Correspondent at Bloomberg stated, “This is the most bullish outcome possible at least for now. OPEC+ called off the meeting and there is not even a suggested date for the next gathering. That’s what we know for sure. The following is open to interpretation but my understanding is that the current deal is the fallback and therefore, after the July production hike, OPEC+ does not have any more scheduled output increases for the next 9 months. It means, in the most practical terms, that OPEC+ will not be increasing production in August and potentially beyond. Obviously, there is a huge diplomatic battle going on and that could change soon.”
Roger Diwan, Vice President at IHS Markit stated, “Nobody increases its leverage in this negotiation by keeping excess capacity unused. That’s not how it works. It is just a matter of time that you re-assert leverage by producing more, being Saudi, the UAE, Iraq or Russia.”
Amena Bakr, Deputy Bureau Chief and Chief OPEC correspondent for Energy Intel stated, “The UAE remains absolutely committed to the proposed increase of production.”
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Saxo Bank analysts said that market participants were “trying to decipher what happens next within the OPEC+ group following a rare diplomatic spat between the UAE and Saudi Arabia. At stake, if the unity weakens, is the group’s ability to continue to control prices, and with this in mind, the market is still refusing to believe that a deal will not be struck eventually.”