LONDON, UK – Oil prices surged on Monday, boosted by a disagreement within OPEC+ over output policy, which prompted a third day of discussions to try to break the impasse among the group’s producers. By 1228 GMT, Brent was up 18 cents, or 0.2 percent, to US$76.35 per barrel, trading near 2-1/2-year highs. Oil in the United States rose 22 cents, or 0.3 percent, to $75.38 per barrel.
After failing to achieve an agreement last week amid a dispute between Saudi Arabia and the United Arab Emirates, the Organization of Petroleum Exporting Countries and its Allies, also known as OPEC+, will restart discussions on Monday.
OPEC+, which agreed to record output cuts in 2020 to deal with a COVID-induced price drop, voted on Friday to increase output by around 2 million barrels per day (bpd) from August to December 2021 and to extend their remaining cuts to the end of 2022, rather than April 2022. The United Arab Emirates vetoed a deal. “Right now, the standoff is helping the oil complex,” StoneX analyst Kevin Solomon said. “However, the longer the standoff persists, we will almost certainly see action by a number of global powers, including the United States, as inflation – and rising gas costs – remains a major global issue,” he said.
The inability of OPEC+ to reach an agreement may bring some short-term gain to the oil market, but “it might also herald the beginning of the end for the broader arrangement, and therefore the danger that members start to boost output,” according to ING Economics.
Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, urged for “compromise and rationality” to reach an agreement on Sunday. Saudi Arabia is OPEC’s largest oil exporter.
The dispute has risen amid uncertainties over the pandemic’s path, as well as concerns about the spread of the coronavirus’s Delta version.
Positive economic statistics from Europe, on the other hand, provided some help. According to a survey released on Monday, euro zone firms increased activity at the quickest rate in 15 years in June as coronavirus restrictions were eased, reviving the service sector.
Energy companies in the United States raised oil and natural gas rigs for the third week in a row.
Baker Hughes Co said in a report on Friday that the number of oil and gas rigs increased by five to 475 in the week ending July 2, the most since April 2020.
(Bozorgmehr Sharafedin reported from London; Aaron Sheldrick contributed additional reporting; Emelia Sithole-Matarise and Edmund Blair edited the piece.)/n
