By Peter Nurse
Investing.com -- Crude oil prices weakened Tuesday, giving up sizable gains as traders digested the failure of a group of major producers to come up with an agreement over future output levels.
By 9:34 AM ET (1340 GMT), U.S. crude was down 0.8% at $74.56 a barrel, after earlier climbing to near seven-year highs, while Brent was down 2% at $75.61.
U.S. Gasoline RBOB Futures were down 0.8% at $2.2810 a gallon.
The Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, ended discussions on Monday over the amount of oil to return to the market. This was due to the United Arab Emirates refusing to sign an agreement that would have resulted in around 400,000 barrels a day returning to the market each month from August to December as well the extension of the broader deal until the end of 2022.
This means that the market will be deprived of vital barrels it needs to rebalance as demand rebounds, particularly as the global market has tightened significantly due to the robust rebound in the major energy consumers, mainly in Europe, the U.S. and China.
Additionally, there was also no agreement on the date for the next OPEC+ meeting.
The fallout within OPEC+ means increased uncertainty in the months ahead if a quick resolution is not found, which suggests increased volatility in prices.
“In theory this means that OPEC+ output will remain unchanged in August, which would be bullish for prices in the short term,” said analysts at ING, in a note. “However, a breakdown in talks puts the broader deal at risk, and so the potential for supply to increase in the longer run.”
OPEC+ members are likely to come under pressure to come to a deal to increase output, with the likes of India already making their point of view clear that prices are too high.
The American Petroleum Institute in June also urged the group to keep the market in balance. Investors will be keeping an eye on the release of U.S. crude oil supply data from the industry group on Wednesday, delayed a day because of Monday’s holiday, with stockpiles consistently falling by hefty numbers.