Oil prices jumped to the highest level in three years after Opec and its allies abandoned a decision over increasing oil production, as Saudi Arabia, Russia, and the UAE struggled to reach a compromise. Opec+ oil ministers had been due to reconvene on Monday after failing to reach a deal at the end of last week, with the UAE chafing over a supply target it believes is too low and that underestimates its production capacity.
But with high-level bilateral talks unable to break the impasse and find the required unanimity of views ahead of the formal meeting’s planned to start, the virtual gathering was canceled. The meeting has been “called off’ said Mohammed Barkindo, secretary-general of Opec to ministers. “The date of the next meeting will be decided in due course.’One person familiar with Saudi Arabia’s policy said the UAE’s stance put a deal out of reach and now prices will likely rise as a result.
“We missed a good opportunity to help the market relieve a temporary shortage,” he said. “They [UAE] need to now take the heat of higher oil prices.”Brent crude oil, the international benchmark, climbed on the news to $77.09 a barrel, gaining one percent to reach the highest level since 2018. US benchmark West Texas Intermediate rose to $76.20 a barrel.
“The Opec+ meeting’s postponement brings the market closer to an August without extra barrels from the alliance, and that is why oil prices immediately jumped on the news,” said Louise Dickson at consultancy Rystad Energy. Riyadh and Moscow have pushed a proposal to increase production by 400,000 barrels a day each month from August to December and to extend the Opec+ supply deal, agreed last year, beyond its scheduled April 2022 end date.
While the UAE said it supports increasing output, it has demanded that its own baseline production — from which supply cuts are calculated — factors in its higher output capabilities and is reviewed before agreeing to extend the deal. People familiar with the UAE’s position said Saudi Arabia and Russia needed more time to discuss Abu Dhabi’s position, which remains unchanged.
“There is no postponement,” a person familiar with the Saudi and Russian position said.