Oil rises after tumble as market awaits Opec+ clarity

Opec voted on July 2 to raise production by about two million barrels per day from August to December. PHOTO: REUTERS

TOKYO (REUTERS) - Oil rose to US$75 a barrel on Wednesday with support coming from a tight market, after a steep drop from multi-year highs in the previous session amid uncertainty about OPEC+ supply policy.

Brent crude was up 86 US cents, or 1.2 per cent, at US$75.39 a barrel by 0905 GMT, after slumping more than 3 per cent on Tuesday. US West Texas Intermediate gained 58 US cents, or 0.8 per cent, at US$73.95, having declined by more than 2 per cent in the previous session.

Energy ministers from Opec+, a grouping that includes the Organisation of the Petroleum Exporting Countries (Opec) along with Russia and other oil producing countries, ended talks on supply policy on Monday.

Divisions between Saudi Arabia, the biggest Opec producer, and the United Arab Emirates (UAE), which opposed extending supply constraints designed to support prices after the fall in demand from the Covid-19 pandemic, were the main reason behind the failure of the discussions.

"There is a possibility of an Opec+ rebellion that could bring unregulated output back to the market," Rystad Energy oil markets analyst Louise Dickson said in a note.

Nonetheless, "the market is getting too tight for consumers, especially in the US, where oil is becoming uncomfortably expensive for consumers and industry", Ms Dickson added.

Opec voted last Friday to raise production by about two million barrels per day from next month to December and to extend the remaining output reductions to the end of next year, but UAE resistance scuppered an agreement.

The breakdown of talks initially sent oil prices surging with US oil hitting the highest since 2014.

Goldman Sachs said the failure of the discussions has clouded Opec's production policy, although the bank reiterated its expectation that Brent would rise US$80 per barrel early next year.

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