July 7, 2021: Oil rose to $75 a barrel on Wednesday with support coming from a tight market, after a steep drop from multi-year highs in the previous session amid uncertainty about OPEC+ supply policy.
A failure of OPEC+ talks on Monday means a planned output rise for August has yet to be agreed. Without extra supply, the market may tighten further but disagreement among the producers could prompt them to open the taps and chase market share.
Underlining the current tightening conditions, U.S. crude inventories are expected to fall for a seventh straight week. [EIA/S]
Brent crude was up 67 cents, or 0.9%, at $75.20 a barrel by 0818 GMT, after slumping more than 3% on Tuesday. U.S. West Texas Intermediate was up 72 cents, or 1%, at $74.09, having declined by more than 2% in the previous session.
“For all the talk of tightening oil fundamentals, the supply outlook is clouded by uncertainty and such conditions are rarely conducive to a sustained increase in prices,” said Stephen Brennock of oil broker PVM.
OPEC+, which includes the Organization of the Petroleum Exporting Countries, Russia and other producers, abandoned talks on Monday after three days of negotiations failed to close divisions between Saudi Arabia and the United Arab Emirates.
Oil initially rallied on the news with Brent climbing on Tuesday to $77.84, the highest since 2018. U.S. crude hit $76.98, the highest since 2014. But prices then slid as traders focused on the prospect of producers opening the taps.
“If history tells us anything, it is that this disagreement could quickly result in another battle of the titans,” analysts at JBC Energy said in a report.
Away from OPEC+, the first of this week's two reports on U.S. inventories, from the American Petroleum Institute, is out at 2030 GMT. Analysts in a Reuters poll expect stocks to fall by 3.9 million barrels.