After OPEC failed to reach an agreement, oil prices hit a six-year high and then turned negative

After OPEC’s negotiations with its oil-producing allies broke down, oil prices jumped to their highest level in six years. Postponed indefinitely, The group failed to reach an agreement on the production policy for August and beyond.

On Tuesday, the U.S. Oil Benchmark West Texas Intermediate Crude Oil Futures The transaction price is as high as US$76.98, which is a price not seen since November 2014.

But these gains quickly faded, and the August delivery contract went lower during the session, eventually falling 2.38%, or $1.79, to $73.37 per barrel.

Brent crude oil It reached its highest level since the end of 2018, and then reversed its gains, closing down 2.63 US dollars, or 3.4%, to 74.53 US dollars per barrel.

Discussion begins last week Between OPEC and its ally (called OPEC+), because the energy alliance seeks to formulate a production policy for the rest of the year. The organization voted on a proposal on Friday that would return 400,000 barrels per day to the market from August to December, thereby increasing another 2 million barrels per day by the end of the year. Members also proposed to extend the production cut to the end of 2022.

However, the United Arab Emirates rejected these proposals, and negotiations continued from Thursday to Friday as the organization tried to reach a consensus. Initially, the discussion was scheduled to resume on Monday, but it was eventually cancelled.

“The date of the next meeting will be decided in due course,” OPEC Secretary-General Mohamed Barkindo said in a statement.

OPEC+ adopted historic measures in April 2020 to cut production by nearly 10 million barrels per day to support prices when demand for petroleum products plummets. Since then, the group has been slowly returning crude oil to the market, while meeting almost monthly to discuss output policy.

“For us, this is not a good deal,” said Suhail Al Mazrouei, UAE Minister of Energy and Infrastructure Tell CNBC on SundayHe added that the country will support a short-term increase in supply, but if the policy is to be extended to 2022, it hopes to obtain better conditions.

Oil’s strong rebound this year-WTI rose 57% during 2021-means that before last week’s meeting, many Wall Street analysts expect the group to increase production to curb price spikes.

TD Securities analysts wrote in a report to clients: “Without an increase in production, the upcoming demand growth should cause the global energy market to tighten faster than expected.”

The company added: “This stalemate will lead to a temporary and significantly larger than expected deficit, which should temporarily push up oil prices. The summer oil price breakthrough is bound to accelerate rapidly.”

— CNBC Sam Meredith Contribution report.