OPEC meeting failed.. Oil awaits the second session of the negotiations
OPEC meeting failed.. Oil awaits the second session of the negotiations: The price of crude oil stagnated at the end of last week’s trading after it was corrected
at the beginning of the week after a meeting between OPEC + oil-exporting countries that had not come to a joint agreement
West Texas Intermediate crude rose slightly this week by 1.49% to the US $75.16 per barrel.
In the meantime, Brent crude declined by 0.01% to $76.17 per barrel.
OPEC Meeting
The ministers of the oil-exporting countries in OPEC Plus (OPEC +) held a meeting last Friday.
During the meeting, it was founded that there was no common ground that could be agreed on whether oil production should be increased or temporarily reduced.
According to CNBC International, this is known to have happened after a disagreement from the UAE,
which wants an increase in production until next year while other OPEC + members disagree.
Sources say that some OPEC + members have already approved the increase. But they just want an increase until December 2021, not until next year.
“The OPEC alliance agreed in principle to increase supplies by 400 thousand barrels per day from August to December 2021 to meet the growing demand,” a source told Reuters.
At the latest, Saudi Arabia’s leading OPEC player in OPEC and non-OPEC Russia are said to have proposed extending the cuts period from early 2022 to the end of next year.
Moreover, OPEC + ministers are said to try to negotiate again tomorrow, Monday.
Performance of oil prices
At the end of the week, Brent crude rose 33 cents to the US $76.17 per barrel after rising 1.6% in the previous session.
West Texas Intermediate crude fell 7 cents to the US $75.16 per barrel.
West Texas Intermediate crude prices posted 1.5% gains for the week, as the US crude market is expected to tighten with refineries reopen to meet recovering gasoline demand.
According to energy services company Baker Hughes, U.S. energy companies added five oil and gas rigs to 475 in the week ending July 2, the highest level since April.
At the same time, Brent oil prices have been stable as the market has been concerned about fuel demand in many parts of Asia,
where cases of Delta Cofid- 19 are on the rise.
Citi analysts said they do not expect West Texas Intermediate crude to rise above Brent crude
as they expect U.S. oil production to increase by the end of 2021 and further growth in 2022.
The dollar near two-month highs also put pressure on oil prices, making the commodity more expensive for buyers in other currencies.
Can OPEC fulfill its plan?
Currently, OPEC +’s plan to increase production in the last months of 2021 is facing a problem. At the July 1 meeting,
the OPEC+ alliance nearly reached an agreement to increase production by 400 thousand barrels per day on a monthly basis from August to December of this year.
However, near the last minute, the UAE protested and asked the oil syndicate to adjust its boundaries.
Louise Dixon, the oil market analyst at Restad Energie, said that if the OPEC + alliance breaks up and collapses,
the oil market could fall into a similar price decline as when Russia left OPEC at the March 2020 meeting and cause a price war.
It is not the traditional rivalry between Russia and Saudi Arabia that would have failed in the negotiations,
but rather the demands of the United Arab Emirates.
The 23 OPEC + countries
The 23 OPEC + countries, led by Saudi Arabia and Russia, once again failed to reach a consensus on their crude oil production quotas as of August,
following the first stalemate in negotiations the previous day.
Therefore, the Organization of Petroleum Exporting Countries (OPEC) and its allies postponed their talks, which began on Thursday,
until Monday, which were initially scheduled to be completed in one day,
as the organization announced in a statement sent to Agence France Presse.
This time, it was not the traditional rivalry between Moscow and Riyadh that changed the course of negotiations:
The United Arab Emirates will be responsible for the failure of the summit,
according to the comments of market observers.
Abu Dhabi had renewed its request from the previous day,
an upward revision of the benchmark production volume,
which serves as the basis for calculating its share.
Eugene Weinberg, an analyst at Commerzbank, explains that this threshold adopted in October 2018 is outdated by the Emirates,
which claims “higher capacity (production) now.”
Ole Hansen, an analyst at Saxobank, said that if 3.17 million barrels per day were adopted,
the UAE minister would insist that it be “raised to 3.8 million barrels per day.“
The plan on the table
However, the OPEC + producing countries had a plan on the table,
which is to increase oil production by 400 000 barrels per day between August and December,
or even later, according to analysts’ expectations.
This strategy is part of OPEC’s approach and policy since May:
Gradually re-increasing production of black gold after being severely tightened
at the beginning of the pandemic in the face of moribund demand.
With some price success, from the seller’s point of view: Crude benchmarks, Brent and West Texas Intermediate,
are hovering around $75, a remarkable 50% increase since January 1, and unprecedented.
At the beginning of June, the Group had already chosen caution, the preferred term for Saudi Energy Minister and de facto leader of the Alliance Abdulaziz bin Salman,
registering for July an increase of a similar percentage (+ 441000 barrels per day) compared to the previous month.
The alliance still has 5.8 million barrels left voluntarily underground every day.
Uncertainty about supply and demand
The task is not easy for the Alliance, which must take into account the many uncertainties
surrounding both supply and demand for crude oil.
On the other hand, high prices displease consumer countries, including India,
an argument for increased production.
But on the other hand, the spread of the highly contagious delta form of Covid-19,
which is driving many countries to develop new measures to restrict the movement of goods and people,
has become a major impediment to black gold consumption
OPEC meeting failed.. Oil awaits the second session of the negotiations