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Markets

Oil rises as tighter market eyed after OPEC+ cancels meeting

  • U.S. crude inventories expected to fall in weekly reports
  • U.S. closely monitoring OPEC+ talks, White House says
  • Brent near highest since 2018, WTI near highest since 2014
07 Jul 2021

LONDON: Oil rose towards $76 a barrel on Wednesday, rebounding from steep losses a day earlier with support coming from a tight market in the short term after OPEC+ talks collapsed this week without a deal to boost supply.

Underlining tightening conditions, U.S. crude inventories are expected to fall this week. The failure of OPEC+ talks on Monday means no output rise has been agreed, while U.S. oil shale firms are hesitating to pump more.

"The OPEC+ deadlock continues, putting the market in a position of risking a sizeable undersupply in August," said Louise Dickson of Rystad Energy. "U.S. shale producers also seem to be reluctant to invest."

Oil drops sharply from multi-year highs

Brent crude was up $1.20, or 1.6%, at $75.73 a barrel by 1127 GMT, after slumping more than 3% on Tuesday. U.S. West Texas Intermediate gained $1.22, or 1.7%, to $74.59, having declined by more than 2% on Tuesday.

OPEC+, which includes the Organization of the Petroleum Exporting Countries, Russia and other producers, abandoned talks on Monday after three days of meetings failed to close divisions between Saudi Arabia and the United Arab Emirates.

OPEC+ abandons oil policy meeting after Saudi-UAE clash

"With no agreement, the production and export levels apparently remain unchanged according to the overall framework, which creates the impression that the group does not shy away from overtightening the market," said Norbert Ruecker of Swiss bank Julius Baer.

The White House said on Tuesday it was encouraged by the ongoing conversation by OPEC members to reach an agreement.

Disagreement among OPEC+ could still prompt them to open the taps. Concern about that scenario had led to Brent falling on Tuesday from a high of $77.84, the highest since 2018, and U.S. crude sliding from $76.98, the highest since 2014.

But Saudi Energy Minister Prince Abdulaziz bin Salman dampened concerns of a price war in an interview with CNBC on Tuesday.

Away from OPEC+, the first of this week's two reports on U.S. inventories, from the American Petroleum Institute, is out at 2030 GMT. Analysts expect crude stocks to fall by 3.9 million barrels.

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