WTI oil price hits 2014 peak after Opec+ talks fail

Oil prices were heading towards three-year highs on Tuesday as the major oil producers failed to reach an agreement on production plans from August onwards to raise supply in the face of rising global demand.

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 would be a boost in August. No new date has been set so far.

“Without an injection of some extra barrels of oil in the coming weeks, given the tightness of the market, Brent might cross the $80/bbl threshold,” UniCredit’s analysts said.

Brent crude climbed 62 cents, or 0.8 per cent, to $77.78 a barrel in mid-day tarding in London, a level not seen since October 2018. US West Texas Intermediate (WTI) crude futures traded up $1.75, or 2.3 per cent, at $76.98, their highest since November 2014.

Opec+ in focus

The Organisation of the Petroleum Exporting Countries (Opec), Russia and other oil producers failed to agree on production plans. Industry insiders said Opec+ would resume discussions this month and agree to pump more from August while some analysts said current curbs might stay in place.

“With large inventory drawdowns expected whether output remains unchanged or increases by 400,000 barrels per day per month (from August), oil prices are likely to remain well supported in the near term,” analysts at bank ING said.

On Monday, Iraqi Oil Minister Ihsan Abdul Jabbar said his country does not want to see oil prices soaring above current levels and that he hoped that within 10 days a date would be set for a new Opec+ meeting.

“Oil advanced... as Opec+ abandoned its July meeting, after the UAE stood its ground over production increases,” said Markets.com analyst Neil Wilson.

The UAE backs Opec+

The UAE said it would go along with output increases but a deal fell through after the UAE rejected a separate proposal to extend curbs to end-2022.

“The failure to agree to increasing production in August and beyond leaves the market even more in deficit than before, so... WTI spiked to a near seven-year peak this morning close to $77,” Wilson said.

The UAE on Friday accepted a proposal from Saudi Arabia and other Opec+ members to raise output in stages by about two million bpd from August to December but rejected extending remaining cuts to the end of 2022 from a current end date of April without adjusting its current baseline production.

Biden calls for solution

The Biden administration is pushing for a compromise solution in the talks, a White House spokesperson said on Monday.

The United States is closely monitoring the Opec+ negotiations and their impact on the global economic recovery from the Covid-19 pandemic, the White House spokesperson said in a statement.

“We are not a party to these talks, but Administration officials have been engaged with relevant capitals to urge a compromise solution that will allow proposed production increases to move forward,” the spokesperson said.

— With inputs from Reuters