Oil futures: WTI futures down 5% from highs as OPEC+ dithers, technical retreat

Quantum Commodity Intelligence – Oil futures slumped in US trading Tuesday, reversing an earlier spike, after a firmer dollar triggered profit taking in the wake of OPEC+ failing to reach an agreement. 

September Brent crude was trading at $74.30/b by 1635 GMT, tumbling 3.7% from its settle of $77.16/b on Monday, and more than 4% down from the 32-month high of $77.84/b.

August WTI was trading at $73.13/b, down 5% from the earlier six-year high of $76.98, which helped triggered the initial technical sell-off, sources said. 

Futures have been especially volatile this week after OPEC+ talks to revise planned cuts to production broke down on Monday, sending oil futures to a near three-year high.

However, it has left market watchers to speculate whether a failure to seal an agreement would result in a price war or whether a resolution would be found speedily, meaning Monday's bull run could come abruptly to an end either way.

"OPEC's credibility is at stake, the Russians now have more leverage and I can't see it any other way than bearish. They have completely undermined OPEC messaging," said a London-based analyst.

Earlier in the day, investment bank Goldman Sachs reiterated its $80/barrel price forecast for this summer, although warned that the threat of a new "OPEC+ price war is no longer negligible".

CFTC data showed Friday that managed money held more than 700,000 net long positions in futures and options in Brent and WTI.

While that net length has been declining over the past two weeks, it remains historically high at the sixth highest weekly net long closing position this year.

The fall comes amid a firmer dollar, with the greenback rising 0.25% versus a basket of currencies.

Without an agreement there will be no production increase in August, said OPEC+ delegates, which had been broadly viewed as bullish by the market.

No date was set for the next OPEC+ meeting, but one Middle East analyst said  Mohammed bin Salman and Mohamed bin Zayed, the respective Saudi Arabian and UAE leaders, would need to resolve the issue.

On Monday, reports suggested the Biden administration is urging OPEC and its allies to find a compromise solution to increase output.