OPEC and non-OPEC ministers postponed the oil output discussions on Monday, for the second straight meeting, as an oil output policy eluded the group. The energy alliance had met via videoconference on Friday afternoon to decide on whether to keep output policy unchanged or to ramp up supply further. But the meeting was put off till Monday as the United Arab Emirates had balked at a proposed eight-month extension to output curbs. But Monday's meet also was deadlocked. Energy Minister Prince Abdulaziz Bin Salman on Sunday had called for "compromise and rationality" to secure a deal after two days of failed discussions last week. The Minister said during an interview with Al-Alrabiya TV on Sunday that there is consensus among OPEC+ countries on extending OPEC+ deal, except for one nation. "Saudi Arabia and Russia are partners in the proposal to extend the OPEC+ agreement and increase production," Prince Abdulaziz added. But on Monday, OPEC+ sources said there had been no progress in resolving the matter and Monday's meeting was called off. No new date was agreed. The failure of the talks means an expected increase in output from August will not take place, the sources said, helping to drive up international benchmark Brent oil, which was trading 1% higher at $76.95 a barrel. Oil prices have already prompted concerns about inflation derailing a global recovery from the pandemic. The disagreements within OPEC+, that have been dragging policy negotiations since Thursday, have added a serious spin of uncertainty for traders and prices are rising on the prospect of a no-deal that could strip the market of the extra barrels that it expects from the alliance from August. Oil market tensions have not been this tense since the March 6, 2020 breakup, and the uncertainty is driving prices beyond 2-year highs in the near short term. The reason a no-deal is bullish for the market is that, unlike the previous breakup in March 2020, if OPEC+ members don't agree on a new deal — they are still party to the original deal already in place which does not immediately cater for more output after July. As balances stand at the moment and with a surge in summer oil demand, even rising output by as much as 500,000 bpd in August is bullish. So keeping OPEC+ production steady to July levels instead is ultra-bullish due to the undersupply that such a development would cause this summer. The core of the OPEC+ rift is that the UAE is lobbying for more production, a demand Russia is quietly supporting on the sidelines and Saudi Arabia loudly opposing on the public arena. If the UAE were to get leniency on its production quotas, it is likely other supply-enthusiastic countries such as Russia and Iraq would also be able to negotiate supply increases. If UAE and more countries are allowed to up their production, the conservative stance that OPEC and Saudi Arabia aimed for is swept away from the table and prices will take a bearish hit. For now, the group is at an impasse as the UAE continues to lobby for a higher production quota, which, if granted, would likely also have to include the other supply hawk countries. A combined lift of quotas could result in an increase of more than the 500,000 bpd that the market originally speculated. An initial August supply boost of more than 500,000 bpd from OPEC+ should theoretically help bring the market balance towards an equilibrium, but it could also be a premature step in light of the highly contagious Delta strain that is triggering countries in Asia to increase social distancing measures. If an increase between 600,000 and 1,000,000 bpd in August starts being discussed, prices may take a moderate dip on the prospect. — Agencies
