Oil prices fell on Tuesday in a volatile session after OPEC canceled a meeting when major players were unable to reach an agreement to increase supply.
Brent crude fell $ 2.63 a barrel, or 3.4%, to $ 74.53, after hitting a session high of $ 77.84, its highest level since October 2018.
US West Texas Intermediate (WTI) crude futures fell $ 1.79, or 2.4%, to $ 73.37 after hitting $ 76.98, the highest level since November 2014.
On Monday, ministers from OPEC +, which includes the Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers, walked out of talks after negotiations failed to close divisions between Saudi Arabia, the largest oil producer. OPEC, and the United Arab Emirates.
Initially, oil recovered on news of the breakdown of talks, but prices fell as traders focused on the possibility that the conflict would cause some domestic producers to turn on the taps and start exporting more barrels.
“The market is concerned that the UAE will step in and unilaterally add barrels and that other people in OPEC will follow suit,” said Bob Yawger, Mizuho’s director of energy futures.
The UAE said it would accept the production increases, but rejected a separate proposal to extend the restrictions until the end of 2022 from the existing April deadline.
Some OPEC + sources said they still believed the group would resume discussions this month and agree to pump more starting in August, although others said current restrictions could remain in place.
The White House said on Tuesday it was closely monitoring the OPEC + talks and was “encouraged” after talks with officials in Saudi Arabia and the United Arab Emirates.
A date for further talks has not been announced.
Analysts expect US producers to start adding supply due to higher prices after months of moderate activity. US production is currently around 11 million bpd, so production has room to increase before approaching the US record of nearly 13 million bpd reached in 2019.
Goldman Sachs said the collapse of the talks had introduced uncertainty into OPEC’s production trajectory. The bank said it still saw Brent hit $ 80 a barrel early next year.
On Monday, Iraqi Oil Minister Ihsan Abdul Jabbar said his country did not want oil prices to skyrocket above current levels and that he hoped that in 10 days a date would be set for a new meeting of the OPEC +.
(Additional reporting from Ahmad Ghaddar in London and Yuka Obayashi in Tokyo Edited by Jason Neely, David Goodman and Nick Macfie)