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Crude oil traders stay on sidelines as OPEC+ talks drag on

Crude oil traders stay on sidelines as OPEC+ talks drag on

02 Jul 2021

NEW YORK: Oil prices were little changed on Friday after OPEC+ ministers delayed an output policy meeting, with sources saying the United Arab Emirates had balked at proposals that included raising supply by 2 million barrels per day (bpd) by the end of the year.

The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, are meeting again on Friday to discuss the plans after UAE opposed the proposals, saying it wanted its quota to be higher, sources said. If the alliance does not stay together, the long rally in prices could be undermined as nations go separate ways and add to supply as they see fit.

Brent crude futures were unchanged at $75.84 a barrel at 11:17 a.m. EDT (1517 GMT), after rising 1.6% on Thursday.

U.S. West Texas Intermediate (WTI) crude futures fell 21 cents to $75.02 a barrel, having jumped 2.4% on Thursday to close at their highest since October 2018.

“We’re in wait-and-see mode here with OPEC,,” said John Kilduff, partner at Again Capital in New York. “We’ll have to see where the Saudis want to come out in terms of holding the group together.”

Both benchmark contracts rose on Thursday after OPEC+ sources said the group aimed to hike output by less than expected and retreated when UAE opposed the proposals, which also included extending the pact on output to the end of 2022.

“If the alliance cracks and breaks up … the oil market could plunge into a very similar price crash witnessed when Russia ‘left’ OPEC+ at the March 2020 meeting and triggered a price war,” said Louise Dickson, oil markets analyst at Rystad Energy

WTI was on track for a 1.3% rise for the week, with the U.S. crude market expected to tighten as refinery runs pick up to meet recovering gasoline demand.

Brent was heading for a 0.5% fall on the week, reflecting concerns about fuel demand in parts of Asia where cases of the highly contagious COVID-19 Delta variant are surging.

Citi analysts said they did not expect WTI to climb to a premium to Brent because they expected U.S. oil output to pick up at the end of 2021 and grow further in 2022.