Oil Continues Fall Over Unresolved Saudi, UAE Rift

By Adedapo Adesanya

Oil futures fell sharply on Wednesday as traders monitor the standoff between the United Arab Emirates and fellow members of the Organisation of the Petroleum Exporting Countries (OPEC) over a proposed output rise.

At the market yesterday, the Brent crude dropped 43 cents or 0.57 per cent to trade at $73.00 per barrel while the West Texas Intermediate (WTI) crude lost $1.25 or 1.14 per cent to settle at $72.14 per barrel.

Oil trading has been volatile after talks among members of the OPEC+ group collapsed on Monday, derailing a proposal to ease existing output curbs in a controlled manner and allow production to rise by 400,000 barrels a day each month from August through December.

The UAE is refusing the deal and called for raise to the baseline that determines its output, and this could lead producers to open the taps and flood the market with crude, potentially causing the current output agreement to be abandoned.

Brent prices have fallen about 5.3 per cent since Monday while WTI has lost more than 4 per cent.

OPEC+ has restrained supply for more than a year since demand crashed during the coronavirus pandemic.

The group is maintaining nearly 6 million barrels per day of output cuts and was expected to add to supply, but three days of meetings failed to close divisions between Saudi Arabia and the UAE.

Analysts noted that barring another full-scale production war such as that seen in March 2020 between Saudi Arabia and Russia, the market will likely need any additional barrels it can get as the global economy continues to recover.

The market will be hoping for a resolution as Russia has reportedly stepped in to mediate between the Saudis and the Emiratis to help strike a deal to raise oil output to a regulated level.

The market may likely find support as crude inventories fell by 8 million barrels in the US for the week ended July 2, according to figures from the American Petroleum Institute (API) compared with an estimate of a 4 million barrel fall by analysts.

Government inventory data from the Energy Information Administration (EIA) is due on Thursday, pushed back a day following the US Fourth of July holiday on Monday.