Brent Oil Steady With Tension Building Before OPEC+ Talks Resume

Brent oil dropped below $76 a barrel ahead of another round of critical OPEC+ discussions to break a stalemate over raising production, with tension rising over the weekend between two long-time allies.

Futures in London slid 0.6 per cent after rising 3.6 per cent last week. Talks are set to resume later Monday after ending Friday without an agreement to boost output due to demands from the United Arab Emirates for better terms for itself. The impasse has led to a rare diplomatic spat between Saudi Arabia and the UAE and leaves the market guessing how much oil it will get next month.

“It’s the whole group versus one country, which is sad to me, but this is the reality,” Saudi Energy Minister Prince Abdulaziz bin Salman said in an interview with Bloomberg Television on Sunday night.

Most OPEC+ members backed a proposal to increase output by 400,000 barrels a day each month from August and push back the expiry of the broader supply deal into late 2022. The UAE, however, is seeking to change the baseline that’s used to calculate its quota, a move that could allow it to boost daily production by an extra 700,000 barrels. It’s also refusing to back an extension of the pact.

“The market is understandably nervous as unity among OPEC appears to be weakening,” said Daniel Hynes, a senior commodities strategist at Australia and New Zealand Banking Group Ltd. in Sydney. “The market is tight. Even with a small increase from OPEC+, we see inventories continuing to draw-down in the second half of the year.”

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