OPEC+ talks break without output agreement, oil prices surge

Quantum Commodity Intelligence – The July OPEC+ meeting was dramatically called off Monday as talks to pave the way for a resolution on production increases from August broke down.

As it stands, without an agreement there will be no production increase in August.

Crude oil futures rallied strongly on the news with September Brent trading $76.93 per barrel (1600 GMT), while August WTI was trading $76.00/b – both up by more than $0.70/b on the news that talks had broken down.

No date was set for the next OPEC+ meeting, but one Middle East analyst said, "it will go up to the big boys, MBS and MBZ," referring to  Mohammed bin Salman and Mohamed bin Zayed, the respective Saudi Arabian and UAE leaders.

"They will talk and we will see what happens," adding that the US may also get involved.

The producer group had agreed in principle to adopt the JMMC's recommendation for a 400,000 bpd -increase each month until year-end, plus extend the current OPEC+ agreement from April 2022 to year end.

However, the UAE said it will only agree to production increases on the condition its baseline production level would be reviewed, 

According to reports, the UAE wants its baseline adjusted to April 2020 levels of around 3.8 million bpd, rather than the October 2018 production level of 3.168 million bpd.

Saudi Arabia and Russia were given baseline levels of 11 million bpd at the April 2020 OPEC+ meeting that agreed to slash production by 9.7 million bpd, while other producers were allocated baselines on October 2018 levels.

"UAE has a solid case for a baseline increase. Problem is, some other countries would see their baselines decrease. So how do they get consensus," said Robin Mills, CEO of Dubai-based energy consultancy Qamar Energy.