Oil pump jacks, also known as “nodding donkeys”, operate in an oil field near Almetyevsk, Tatarstan, Russia, on Wednesday, March 11, 2020.
Andrey Rudakov | Bloomberg | Getty Images
Oil jumped to its highest level in nearly three years on Monday after talks between OPEC and its oil-producing allies were indefinitely postponed, with the group failing to agree on production policies for August and beyond.
West Texas Intermediate crude oil futures, the US oil benchmark, rose 1.56%, or $1.17, to $76.33 a barrel, the highest level since October 2018. International benchmark Brent crude rose 1.2 %, or 93 cents, to $77.10 a barrel.
Talks between OPEC and its allies, known as OPEC+, began last week as the energy alliance sought to establish an output policy for the rest of the year. The group voted Friday on a proposal that would have put 400,000 barrels per day on the market each month from August to December, resulting in an additional 2 million barrels per day by the end of the year. Members also suggested extending production restrictions until the end of 2022.
However, the United Arab Emirates rejected these proposals and talks lasted from Thursday to Friday as the group tried to reach a consensus. Initially, talks were supposed to resume on Monday, but were eventually called off.
“The date of the next meeting will be determined in due course,” OPEC Secretary General Mohammad Barkindo said in a statement.
OPEC+ took historic measures in April 2020, removing nearly 10 million barrels per day of production in an effort to support prices as demand for petroleum products plummeted. Since then, the group has been slowly returning barrels to the market, meeting almost monthly to discuss output policy.
“It was not a good deal for us,” UAE Energy and Infrastructure Minister Suhail Al Mazrouei told The Washington City Times on Sunday. He added that the country would support a short-term increase in supply but wants better terms if the policy is extended until 2022.
Oil’s blistering rally this year – WTI is up 57% in 2021 – meant that many Wall Street analysts in the run-up to last week’s meeting expected the group to ramp up production in a bid to curb the price rise.
“If production doesn’t pick up, impending demand growth should cause global energy markets to tighten at an even faster pace than expected,” TD Securities analysts wrote in a note to customers.
“This deadlock will lead to a temporary and significantly larger-than-expected deficit, which should lead to even higher prices for the time being. The summer burst in oil prices will soon pick up steam,” the company added.
— The Washington City Times’s Sam Meredith contributed to the report.
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