Oil costs soar to multi-year highs after OPEC + talks didn’t result in a manufacturing deal

Oil pump jacks, also known as “nodding donkeys”, work 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 and the group failed to reach an agreement 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, their highest level since October 2018. The 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 when the Energy Alliance tried to set a production policy for the remainder of the year. The group voted on Friday on a proposal that would have brought 400,000 barrels a day to market every month from August through December, adding up to an additional 2 million barrels a day by the end of the year. Members also suggested extending the production cuts until the end of 2022.

The UAE turned down these proposals, however, and talks stretched Thursday through Friday as the group tried to reach consensus. The talks were originally supposed to resume on Monday, but were ultimately broken off.

“The date for the next meeting will be set in due course,” said OPEC Secretary General Mohammad Barkindo in a statement.

OPEC + took historic measures in April 2020, removing nearly 10 million barrels per day of production to support prices as demand for petroleum products plummeted. Since then, the group has been slowly returning barrels to the market while meeting almost monthly to discuss production policy.

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“It wasn’t a good deal for us,” UAE Energy and Infrastructure Minister Suhail Al Mazrouei told CNBC on Sunday. He added that the country would support a short-term increase in supply but would like better terms if the policy is to be extended through 2022.

Oil’s soaring rally this year – WTI is up 57% in 2021 – meant many Wall Street analysts, ahead of last week’s meeting, expected the group to step up production to curb price hikes.

“Without an increase in production, the imminent growth in demand should lead to the global energy markets picking up even faster than expected,” wrote analysts from TD Securities in a message to customers.

“This impasse will lead to a temporary deficit well above expectations, which should fuel even higher prices for the time being. The summer oil price eruption will accelerate at a rapid pace, ”added the company.

– CNBC’s Sam Meredith contributed to the coverage.

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