Oil prices dipped on Wednesday, recovering from a steep drop in the previous session, after the cancellation of talks among OPEC+ producers that raised the prospect the world’s major crude exporters will turn on the taps to gain market share.
U.S. West Texas Intermediate (WTI) crude futures traded down 36 cents, or 0.49% to $73.40 a barrel.
Brent crude was down 35 cents, or 0.47%, at $74.54 a barrel, after slumping more than 3% on Tuesday.Energy ministers from OPEC+, a grouping that includes the Organization of the Petroleum Exporting Countries (OPEC) along with Russia and other oil producing countries, ended talks on supply policy on Monday.
Divisions between Saudi Arabia, the biggest OPEC producer, and the United Arab Emirates (UAE), which opposed extending supply constraints designed to support prices after the fall in demand from the pandemic, were the main reason behind the failure of the discussions.
The breakdown of talks has raised concerns that agreements on restraining production to keep prices from falling will break down, leading to a flood of supply onto the market.
“Despite growing risks of an OPEC+ collapse, the leadership in Riyadh and Abu Dhabi will most likely attempt to avert such an outcome,” Eurasia Group said in a note.
OPEC voted on Friday to raise production by about 2 million barrels per day from August to December and to extend the remaining output reductions to the end of next year, but UAE resistance scuppered an agreement.
Goldman Sachs said the failure of the discussions has clouded OPEC’s production policy, although the bank reiterated its expectation that Brent would rise $80 per barrel early next year.