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Oil Prices Hike as OPEC+ Standoff Continues

Oil Prices Hike as OPEC+ Standoff Continues

Oil prices are trading higher on Monday as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) seek to overcome the impasse between Saudi Arabia and the United Arab Emirates in setting production quotas for the coming months. The United Arab Emirates are refusing to sign an agreement to increase the production of barrels, which is crucial to stop the price escalation on the oil market.

In London a barrel of Brent is already worth $76.47, up 0.38%. On the other side of the Atlantic, in New York, WTI is up 0.47%, to $75.51.

In the last week of June, Saudi Arabia and the United Arab Emirates failed to agree on new production quotas. Therefore, in order to stop the rise in prices, OPEC+ resumed negotiations this Monday. OPEC+ wants to increase production by about 2 million barrels per day between August and December of this year, and extend production cuts from January until the end of 2022, instead of only until April. However, the United Arab Emirates are not interested in this strategy.

Faced with the impasse, because of the position of the United Arab Emirates, Prince Abdulaziz bin Salman, Minister of Energy of Saudi Arabia, which is the largest oil exporting country of OPEC+, has already called on the United Arab Emirates for a position of “compromise and rationality” to ensure an agreement.

The impasse only adds more uncertainty to the evolution of the global economy in the face of the effects of the Covid-19 pandemic.

According to “Reuters,” which quotes StoneX market analyst Kevin Solomon, “the longer the stalemate remains” the worse the scenario will be, given the worsening of prices and rising inflation. “We will see intervention from several global powers, such as the United States, as inflation – and rising gas station prices – remains a global concern.”

On the other hand, according to ING Economics, also quoted by the Anglo-Saxon agency, the failure of the negotiations may bring some advantages to the oil market, although in the short term.

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