(Bloomberg) -- Brent oil was steady near $76 a barrel at the open in Asia ahead of another round of critical OPEC+ talks slated for later Monday to break a stalemate over raising production.
Futures in London were little changed after settling near the highest since October 2018 on Friday. Negotiations ended without a deal to boost output last week after the United Arab Emirates stuck to demands for better terms for itself. The impasse puts the alliance’s market management at stake with a supply deficit set to widen as global demand rebounds from the pandemic.
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Brent crude jumped more than 8% last month, capping a powerful first-half rally, aided by a steady demand recovery in key economies including the U.S., Europe and China. That advance was also underpinned by the Organization of Petroleum Exporting Countries and its allies keeping a tight rein over supplies. Elevated energy prices are stoking concern about inflation, and the White House is already voicing concern about rising gasoline prices.
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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 an extra 700,000 barrels. It’s also refusing to back an extension of the pact.
A failure by the cartel to agree to raise production may further squeeze the market, while a breakdown in their unity could result in a free-for-all that crashes prices -- just as it did during a price war between the allies last year.
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With the UAE steadfast in its refusal to give ground, the prospect of a no-deal outcome as well as its exit from OPEC “has risen materially even if it has not yet fully entered into firm base-case territory,” RBC Capital Markets analysts including Chief Commodities Strategist Helima Croft said in a note. The prospect of $100-a-barrel oil is so politically unpalatable that U.S. officials may appeal to prevent a virtual fireworks display on Monday, they said.
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