Oil prices plunged Tuesday night as OPEC+ talks descended into crisis and the market was left confused about the organization’s next move.
Crude oil reversed course sharply during Tuesday’s U.S. session, with WTI crude futures losing $73 per barrel, down more than 4% at one point during the day. Brent crude oil futures lost the $75 mark. The main Shanghai crude oil futures contract closed down 3.67% overnight at $454.6/barrel.
The NYMEX most active WTI crude oil main futures contract traded 5,442 lots in a minute at 21:11 GMT on July 6, with a total contract value of $406 million. 5,199 lots were traded in a minute at 23:08, with a total contract value of $382 million.
Earlier, the intense tug of war between Saudi Arabia and the UAE prevented the increase in crude oil supply, and oil prices once jumped to the highest level in more than six years. Within hours, however, oil prices reversed their gains and fell sharply as traders speculated that a breakdown in negotiations could completely unravel OPEC’s plan to cut production.
Moreover, the volatility in oil prices suggests that the organization’s internal divisions threaten the stability of the global economic recovery amid concerns about inflation and undermine the organization’s self-image as a reliable manager of the oil market.
Robert Yawger, executive director of energy futures at Mizuho Securities, said in a report that Tuesday’s turn down in oil prices marked a “classic reversal of the market.
Christyan Malek, head of oil and gas research at J.P. Morgan, said Tuesday’s reaction stemmed from concern or “suspicion that this is not the real price of oil and that the last two or three days have reminded us that OPEC+ is trying to solve the problem.
He also believes that OPEC+ is guiding demand that is “just coming out of the no-go zone”. The oil market will face a “historic supply gap” in the coming quarters, and there is uncertainty about future supply and demand growth, adding to the selling pressure at the long end of the curve. However, the failure of OPEC to reach an agreement is “not surprising” and will not rise to the level of a crisis or serious dispute.
On Tuesday, local time, former U.S. Energy Secretary Dan Brouillette (Dan Brouillette) said that after the failure of OPEC + negotiations, oil prices could “easily” reach $ 100 per barrel. But he also pointed out that the price of oil “equally likely” to collapse. He said.
“If there is no agreement on production, and countries tend to go their own way or produce themselves, then oil prices could collapse.”
Rystad Energy oil market analyst Louise Dickson cautioned that OPEC+ members do not want to see an agreement not reached that would result in oil production remaining unchanged after July. The market believes that the possibility of OPEC making partial compromises to reach a deal that would make the UAE more satisfied is rising.
If OPEC+ finally agrees to raise production by more than 500,000 barrels per day in August, the market could see an immediate pullback in oil prices, Dickson said. Everyone will be watching closely for information that may leak out of closed-door meetings rather than official negotiations, when market volatility is expected to be maddening.
Golden 10 Data has also previously reported that the biggest black swan in the oil market is dancing and a repeat of the 2014 oil price “massacre” is not out of the question.