Divisions within the Organization of the Petroleum Exporting Countries and its allies (OPEC+) have been laid to bear after hours of talks on Monday about oil production broke down.
Despite the tensions, oil prices modestly gained ground and subsequently lost momentum during trading on Tuesday.
The benchmark Brent price (BZ=F) swung in trading on Tuesday, up around 0.9% to $48.14 (£35.40) per barrel at 9:10am in London. WTI crude also gained 0.7% to $45.57 a barrel.
The group’s talks have now been delayed until Thursday rather than Tuesday to allow ministers more time to reach a deal.
Talks will continue by phone, according to Bloomberg.
The discussions centre on whether to increase production in January as planned or maintain the cuts that spurred on the recent market rally in oil prices.
“The problem seems to be not whether to delay increasing output but rather what conditions to attach to the delay,” said Marshall Gittler, head of investment research at BDSwiss Group.
“Out of the nine non-OPEC members of OPEC+, only three have kept to their production quotas. The rest, notably Russia, are overproducing. The UAE and some others want these overproducers to compensate by reducing their output in Q1, or at least to keep to their targets.”
The inability to reach a deal could hurt prices over the long-term, which have been experiencing modest gains as COVID-19 virus vaccine hopes have underpinned sentiment over a global macroeconomic recovery.
Divisions have been quite pronounced between the United Arab Emirates and other members in the lead up to the meeting.
“The market is underestimating a little bit how serious this is -- this is one of Saudi Arabia’s biggest allies,” Amrita Sen, co-founder of consultant Energy Aspects Ltd., told Bloomberg Television. She added that she does not expect further divisions this week, though tensions will persist into next year.
“Despite the disputes, they will get through this one,” she said.
For Gittler, the tensions could spell further trouble, as he predicted “oil (and oil-related currencies) to fall further if they can’t reach some sort of agreement that would withhold oil from the market.”
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