Oil prices rise to a three-year high after countries fail to reach an agreement
Opec+ have postponed a decision on whether or not to ramp up oil production as major players within the cartel have failed to reach an agreement on supply levels.
The Financial Times reported that it is unclear when talks will start again.
Russia and Saudi Arabia proposed raising production levels by 400,000 barrels per day every month from August through to the end of the year.
In addition, they pushed to extend extend the Opec+ supply deal beyond the initially planned April 2022 end date, the Financial Times reported.
The UAE, however, stood in the way of a deal, suggesting that the baseline from which production cuts are calculated should be increased.
Oil prices rose to a three-year high after the countries failed to reach an agreement.
Jamie Maddock, equity research analyst at Quilter Cheviot, commented on some of the ramifications of the news emerging from the OPEC+ discussions:
“Unlike previous meetings where the agreements have centred around holding back product to boost prices, the point of contention this time round was whether producers should increase supply. Combined with the rising oil demand driven by easing travel restrictions, the impasse in discussions and inability to find an agreement on increasing supply will provide further support to oil prices to the clear benefit of oil producing nations,” said Maddock.
“Crucially, it could also provide a challenge to the consensus view that global inflation is simply transitory.”
“But there’s also a risk that the stalemate presents a challenge to sustained OPEC+ cohesion in the future. With plentiful latent supply and now a breakdown in OPEC cohesion, we could see more volatility in oil prices going forward.”
“But for the time being, the oil majors are reaping the benefits, enabling rapid debt paydown and comfortably funding old and new energy investment. While at the same time, the prospect of enhanced shareholder returns are increasing.”