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Oil prices tumble after OPEC producers cancel meeting over supply dispute

Written by on 06/07/2021

Oil prices have taken a tumble after OPEC producers failed to agree a supply increase.

Brent crude fell $2.63 (3.4%) a barrel to $74.53, having hit a session peak of $77.84, its highest since October 2018.

West Texas Intermediate crude futures were down $1.79 (2.4%) to $73.37 after touching $76.98 earlier – its highest since November 2014.

On Monday, ministers from OPEC+ (the Organization of the Petroleum Exporting Countries and other producers such as Russia) walked away from talks after failing to resolve a dispute between the largest producer Saudi Arabia and the United Arab Emirates.

The United Arab Emirates had rejected a proposed eight-month extension to output curbs that OPEC+ had imposed on each other last year.

The curbs amounted to record output cuts of almost 10 million barrels per day (bpd) – about 10% of world output.

But the UAE wants to pump more oil and says its baseline was set too low when OPEC+ originally forged its production pact.

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The fall in oil prices was attributed to fears that the UAE would step in and add barrels, forcing the other countries to follow and increase supply.

Some OPEC+ sources told Reuters news agency they still expected the group to resume talks later this month, but a date has not been officially confirmed.

Goldman Sachs has said the collapse of the talks introduced uncertainty to OPEC’s production path but it still expected Brent to reach $80 a barrel early next year.

After a crash for prices at the start of the COVID-19 pandemic, production curbs were agreed by the OPEC+ countries to help support their oil incomes.

But prices have been rising steadily this year as economies have reopened from pandemic-driven lockdowns.

Demand for oil, therefore, has lifted and so have prices.

But this has seen fuel costs rise for households, almost hitting eight-year highs.

It also worries central bank policymakers, because surging energy costs have been the main source of inflation, which is a potential barrier to economic recoveries.

 Sky News

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