UAE Denies Reports That OPEC+ Deal Has Been Reached, Oil Slides

Update (1000ET): Not so fast! Reuters is reporting that the UAE Energy Minister has confirmed that no agreement has been reached yet with OPEC+ and that deliberations continue.

And that headline removed all the earlier gains from oil prices…

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Saudis fold?

Oil algos are unsure what to make of the latest headlines for now as Bloomberg reports that UAE has resolved its standoff with OPEC and agreed on a new higher baseline production level of 3.65m b/d (versus the UAE’s prior 3.16m b/d output level).

Additionally, the OPEC+ deal is to be extended until the end of 2022 (vs the original April 2022), according to a source.

Reminder, OPEC+ talks were postponed early July after the UAE dissented on OPEC’s August proposal, prompting some concerns over the future of OPEC, especially as reports were doing the rounds that the UAE was mulling a unilateral increase in production..

WTI tested up to to $75 and tumbled down to $74 on the headline, then rebounded rapidly back up to test $75 again…

Some context for that price level relative to pre- and post-OPEC_ meeting…

At first glance this is a positive for oil, since it removes the uncertainty of a cartel collapse, but – as price is showing us – the increased supply is a net negative (and signals to other players that they can hold the Saudis to ransom over a big deal and increase their own outputs).

Bloomberg also reports that an unnamed OPEC delegate has confirmed a new date for a meeting will be set soon.

However, oil prices will continue to be volatile, as Ed Morse, head of commodities research at Citigroup Inc., noted: “Even if OPEC decides to raise output in August, that crude will not reach refineries until after the August peak-demand period will be over.”