Oil held onto its gains and remained near $75 U.S. a barrel after the Organization of the Petroleum Exporting Countries and their allies (known as OPEC+) delayed a highly anticipated decision on raising output levels.
Oil futures in New York traded near $75 U.S. after jumping 2.4%. OPEC+ was forced to postpone a decision on output after the United Arab Emirates blocked a deal. The standoff could ultimately lead to OPEC+ not increasing supply, which would mean the cartel would fall back on terms that call for production to remain steady until April 2022.
The delay on an oil production increase could also lead to an inflationary spike in prices if OPEC+ can’t come to an agreement.
Before the breakdown, the alliance appeared to have an agreement in principle to boost output to 400,000 barrels a day each month from August to December to meet rising demand as economies recover from the pandemic.
OPEC+ ministers will reconvene Friday as the dramatic turn of events leaves the market in limbo and tarnishes the cartel’s carefully reconstructed reputation after last year’s costly Saudi Arabian-Russian price war.
If OPEC+ can’t reach an agreement, it raises the possibility that crude oil will surge higher and add to mounting inflationary pressures in the global economy. Oil had just capped its best half since 2009 as the rapid rebound in energy demand in major economies outpaced the supply response.
