(Bloomberg) — Oil climbed back above $76 a barrel after OPEC+ ended days of talks without reaching a deal to bring back more halted output next month, depriving the market of vital barrels it needs as demand rebounds.
Futures in New York advanced 1.5% from Friday’s close after there was no settlement Monday due to a U.S. holiday. A disagreement over how to measure production cuts upended a tentative deal to boost production and devolved into a public spat between Saudi Arabia and the United Arab Emirates. The was also no agreement on the date for the next OPEC+ meeting.
See also: OPEC+ in Crisis as Specter of Destructive Infighting Looms Again
The global market has tightened significantly due to the robust rebound in key energy consumers such as the U.S. and China, which is driving an increase in fuel demand and draining stockpiles built up during the Covid-19 pandemic. The International Energy Agency last month urged OPEC+ to keep markets balanced as worldwide demand accelerates toward pre-virus levels.
While the situation is fluid and OPEC+ could reactivate talks, the breakdown damages the group’s image as a responsible steward of the oil market. It also raises the specter of a destructive internal price war similar to last year.
The market has firmed in a bullish structure. The prompt timespread for Brent was 99 cents in backwardation — where near-dated prices are more expensive than later-dated ones — on Monday. That compares with 54 cents at the start of last week.
OPEC+ has been reviving some supply halted during the pandemic, adding about 2 million barrels a day from May to July. The alliance was close to a deal to raise daily output by a further 400,000 barrels from August and extend the pact beyond April 2022. The UAE, however, said it would only accept the proposal if it was granted the same terms for calculating its quota as the Saudis.
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