Analyst Talks Latest OPEC+ Breakdown

The fact that OPEC+’s latest meeting got postponed on Monday, and the time it took for this to be announced, shows that there are some negotiations on the sidelines, which can also be interpreted by the market as an effort to reach a consensus between the OPEC+ members.

That’s according to Rystad Energy’s oil markets analyst Louise Dickson, who noted that a ‘no deal’ that keeps output unchanged after July is not an outcome that any of the OPEC+ members want. Dickson said the OPEC+ meeting’s postponement brings the market closer to an August without extra barrels from the alliance and highlighted that this was why oil prices immediately jumped on the news.

“The market may be expecting a deal to increase output, but the fact that we don’t have it yet, after all the anticipation, is increasing the possibility of a surprise outcome that could keep supply stable,” Dickson said in a statement sent to Rigzone on Monday.

“Postponing the meeting also reveals that the objections that the UAE raised are not easy to brush off. It may take some convincing and some serious concessions from Saudi Arabia to reach a deal now, and these should only mean increasing output more than initially suggested going forward – if a deal is to be agreed among OPEC+,” Dickson added.

“Of course, if the UAE gets its way in coming days, that would be a development that could displease other members that also want an output boost, which could complicate negotiations even more. That’s exactly why this crucial OPEC+ meeting drags on,” Dickson went on to say.

If OPEC+ eventually agrees to increase output well over 500,000 barrels per day in August, satisfying the UAE and other members that may side with the idea of adding more barrels, then we could see an immediate price correction, Dickson noted.

“Current prices are built high on the prospect of either a no deal scenario or a mild increase as initially suggested,” the Rystad representative said. “That makes them very fragile to a deal with concessions and of a much larger production boost than initially discussed,” Dickson added.

“Once again, after a long time, traders are now observing OPEC+ member differences that are difficult to bridge and all eyes from now on will be on potential leaks of how behind closed doors unofficial negotiations evolve. It could be a wild price ride to either direction,” Dickson continued.

OPEC+ failed to reach a new production deal at its July 1 meeting and at continued talks on July 2 and July 5. At the time of writing, no date has been set for a new OPEC+ meeting.

To contact the author, email andreas.exarheas@rigzone.com