Brent Crude price surged as OPEC+ completed days of talks without reaching an agreement to resume additional restricted supply next month, depriving the market of vital barrels as the global economic recovery picks up speed.
After the coalition failed to achieve a deal, current output limits will remain in place for August unless talks are resumed in the coming days, futures in London jumped 1.3 percent. A disagreement over how to assess output cuts shattered a tentative supply-side solution, resulting in a public confrontation between allies Saudi Arabia and the United Arab Emirates.
Brent, the worldwide benchmark under which two-thirds of the world’s oil is traded, increased 0.43 percent to $77.49 a barrel. The major North American benchmark, West Texas Intermediate, was up 2.05 percent at $76.70 per barrel.
The failure by OPEC+ to reach an agreement on future production increases has left the market undersupplied while the expected return of 2 million barrels per day is in jeopardy.
OPEC’s third-largest producer, the United Arab Emirates, has pushed the exporters’ organization to “decouple” output curbs from plans to extend the existing deal beyond April 2022.
OPEC+ had restored nearly 2 million barrels per day of production that had been suspended during the pandemic, which lasted from May to July. The alliance was near to reaching an agreement to increase daily output by 400,000 barrels per month from August to December and to extend the supply pact until April 2022. But the UAE stated that it would accept the output rise even if the contract was not extended, but the Saudis objected.
According to estimates, the gap between the baseline used to determine the UAE’s quota under OPEC+ and its present production capacity is 18 percent, the most among the group’s producers.