Oil Up, OPEC+ Talks Fail to Reach an Agreement to Increase Supply

© Reuters.

By Doris Yu

AiVIF.com – Oil was up Tuesday morning in Asia as the Organization of the Petroleum Exporting Countries and allies (OPEC+) failed to reach a deal to increase fuel output in August after days of talks.

Brent Oil Futures rose 0.38% to $77.45 by 10:19 PM ET (2:19 AM GMT) and Crude Oil WTI Futures jumped 2.06% to $76.72.

Investors now await U.S. crude oil supply data from the American Petroleum Institute, due later in the day.

On the demand front, the economic recovery from COVID-19 in key markets, including China and the U.S., is boosting the fuel demand and draining inventory buildup. The American Petroleum Institute in June urged the OPEC+ to keep market balances amid an increasing fuel demand worldwide.

The OPEC+ talks collapsed as one of the cartel’s members the United Arab Emirates seeks to increase supply while Saudi Arabia proposes to keep a tight lid on production. Meanwhile, the cartel didn’t agree on a date for the next OPEC+ meeting.

Investors were concerned that it could escalate into a conflict as destructive as 2020’s price war.

OPEC+ added about 2 million barrels a day from May to July to revive some supply it halted during COVID-19. The cartel was going to increase its daily supply by additional 400,000 barrels from August 2021 to April 2022. The United Arab Emirates, however, didn’t accept the proposal unless it was granted the same terms for calculating its quota as Saudi Arabia

In the short term, the market would not expect an output increase in August and the market will be short of barrels amid economic rebound globally.

“With the oil market already in deficit and supply growth lagging oil demand growth,” the current OPEC+ production limits is likely to send prices higher, Giovanni Staunovo, a commodities analyst at UBS Group AG (SIX:UBSG), told Bloomberg.