Talks between the Organization of the Petroleum Exporting Countries and its allies broke down earlier this month after the UAE objected to extending the supply cut agreement beyond April 2022.
As investors are poised to increase supply in the event of a deal of major OPEC producers, rising US fuel stocks (oil and diesel) and alarming signals from the world’s largest consumer about demand decreased the Oil prices more than 1% on Thursday
September’s Brent crude futures fell 91 cents, or 1.2%, to $73.85 a barrel as of 0640 GMT, while West Texas Intermediate (WTI) crude for August fell $1.02, or 1.4%, to $72.11 a barrel.
Both indicators fell more than 2% on Wednesday after it was reported that Saudi Arabia and the UAE had reached a compromise that would pave the way for an agreement to increase the supply of crude to the oil market and calm rising prices.
However, even as OPEC+ signs an agreement to increase production by the end of 2021, supply is expected to remain controlled and tight. With Brent on track to reach mid-$80 in the near term, OPEC+’s big bargain may be too little and too late to change the global oil balance for logistical reasons.
The market is not willing to take risks. Prices are already exorbitant, so traders may want to pull some money off the table before the deal takes place.
U.S. crude stockpiles fell for their eighth week last week, but oil and diesel inventories rose despite falling refinery processing rates on Wednesday, according to data from the Energy Information Administration.
The massive drop in crude oil inventories did not boost oil prices much. But on Thursday, China, the world’s largest importer of crude oil, reported record crude processing volumes at its refineries in June, easing some of the downward pressure on oil prices.
Meanwhile, the possibility of Iran’s quick return to global markets has been left for later, as talks on reviving the 2015 nuclear deal will not resume until mid-August.
