Oil rises despite OPEC+ disharmony
Oil rose on Tuesday morning in Asia amid the Organization of the Petroleum Exporting Countries and allies’ (OPEC+) failure to reach a consensus to increase fuel output in August after days of deliberation.
Brent oil futures inched up 0.38% to $77.45 by 10:19 PM ET (2:19 AM GMT) while WTI futures flew 2.06% to $76.72.
The OPEC+ talks floundered on Monday as the United Arab Emirates (UAE) sought to increase supply against the proposal of Saudi Arabia to retain the restrictions on production. The group has yet to agree on a date for its next meeting.
Investors are apprehensive of the implications of the OPEC+ disagreement, fearing that it could potentially escalate into a conflict as damaging as 2020’s price war between Saudi Arabia and Russia that ushered the black gold into negative territory.
Regarding supplies, the market drops hope of an increase in output in August and will have a shortage of barrels even as the global economy strives to recover from COVID-19. OPEC+ put in about 2 million additional barrels a day from May to July 2021 to revive some of the supply that was discontinued as COVID-19 spread in 2020.
The oil group intended to increase its daily supply by an additional 400,000 barrels from August 2021 to April 2022. However, the plan was not put in motion as the UAE expressed disagreement unless it was granted the same terms for calculating its quota as Saudi Arabia.
Going over to the demand side, the economic recovery from COVID-19 in major markets such as the US and China is increasing demand for fuel even as the supply dwindles. The American Petroleum Institute (API) urged the OPEC+ in June to maintain balance in the market as global demand for fuel continues to rise.