Oil Markets Remain Unstable as OPEC+ Abandons Talks
Following a breakdown in talks between OPEC members and non-OPEC allies, The International Energy Agency warned on Tuesday that the world oil markets are likely to remain erratic. CNBC reported that in the latest monthly oil market report, the IEA said energy market participants were monitoring the outlook of a supply shortage if a deal was not reached.
The Organization of the Petroleum Exporting Countries, otherwise known as OPEC, is a group of 13 oil-producing nations with a mission to ensure that oil prices are stabilized in the international market without any major variations.
“Oil markets are likely to remain volatile until there is clarity on OPEC+ production policy. And volatility does not help ensure orderly and secure energy transitions — nor is it in the interest of either producers or consumers,” the IEA said.
Talks were scheduled to take place last week to boost oil supply; however, OPEC+ abandoned these plans. According to CNBC, most delegates agreed to increase oil production to 400,000 barrels per day in monthly installments in August, which was expected to extend supply cuts through the end of 2022. Meanwhile, the UAE dismissed these plans and insisted on a higher baseline from which cuts are calculated to demonstrate its increased capacity.
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U.S. inventories have fallen to their lowest since February 2020 while demand for gas reached its highest since 2019 as the economy reopens, reports Reuters. Americans are paying an average of $3.15 per gallon for gas, the most in seven years, according to the New York Post.
OPEC+ cut crude production last year in an attempt to support oil prices amid the pandemic. The energy alliance has since met monthly to decide the next stage of production policy. Meanwhile, OPEC+ has not made any progress in resolving arguments between OPEC’s Saudi Arabia and the UAE, Reuters reported on Tuesday, citing unnamed OPEC+ sources and mentioned by CNBC.
The IEA anticipates global oil demand to increase by 5.4 million barrels per day this year and an additional 3 million barrels in 2022, CNBC reported. The agency also warned that higher fuel prices and rising inflation could damage the economic recovery.
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Last updated: July 13, 2021