Crude prices are witnessing some volatility after an initial spike but backtracked slightly on Monday. Brent futures slid 0.11% to $76.09 per barrel, while U.S. crude futures fell 0.13% to $75.06 per barrel.
The energy alliance, often introduced as OPEC+, will convene again on Monday. This comes after disappointing to reach a deal twice last week.
Without a deal, oil prices could rise and threaten to crash a weak economic recovery. If talks fall through, there could also be a price war. However, analysts do not believe the latter scenario is likely.
According to Reuters, the United Arab Emirates prevented a deal to raise oil production and extend the expiry of the group’s wider production supply agreement to the end of next year. The UAE stated the extension should be conditional on improving the so-called baseline, deciding how much a country can pump.
Both Brent and U.S crude shot up higher than 2% to above $75 per barrel on Thursday, touching highs not seen after 2018. The deal first slipped through on Thursday, and a second meeting on Friday disappointed to see any breakthrough.
Oil prices have grown higher than 45% in the initial six months of 2021. Demand has been increasing as global economies revived.
Why oil prices spiked
As stated by Reuters, the UAE — a long-time ally of OPEC’s leader Saudi Arabia — opposed the deal twice last week.
The agreement is to boost oil production gradually while at the same time prolonging the duration of broader cuts that the group accepted in 2021.
Last year, to cope with weaker demand as the coronavirus crisis blow and people travel less, OPEC+ agreed to curb production by nearly 10 million barrels per day from May 2020 to the end of April 2022.
At last week’s meeting, OPEC kingpin and non-OPEC leader Russia also suggested lengthening the duration of cuts until the end of 2022, as stated by Reuters.
Top producers Saudi Arabia and Russia had entered a preliminary agreement. They would, in principle, raise supply by 400,000 barrels per day from August to December 2021 to meet growing demand, Reuters reported, quoting unnamed sources.