After crossing US$76 per barrel level on Tuesday, Oman crude price at the Dubai Mercantile Exchange (DME) dropped 3.5 per cent to close at US$73.42 per barrel on Wednesday.
The price of Oman crude struck a 2018 pinnacle on Tuesday after OPEC+ oil producing countries failed to agree on lifting crude output despite improving demand due to global economic recovery.
According to a DME statement, the average price of Oman crude (for July delivery) has stabilized at US$66.40 per barrel, which is US$3.30 per barrel higher than the average price for June delivery.
US oil futures approached a seven-year peak after the talks between the 23 members of the petroleum producers group were called off, an OPEC statement said, ending negotiations on a proposal to boost crude supply.
But investors quickly shifted course, selling off both Brent and West Texas Intermediate (WTI) futures contracts, as investors fixated on a possible disintegration of any effort to rein in supply.
WTI oil was down by 2.4 per cent at US$73.37 in New York, while Brent North Sea crude fell 3.4 per cent at US$74.53 in London.
“There is capacity to produce more oil, much more in fact, and the market expects that logic will soon prevail,” Rystad Energy analyst Louise Dickson told AFP.
The group had been weighing a proposal that would see the world’s leading oil producers raise output by 400,000 barrels per day (bpd) each month from August to December.
That would add two million bpd to markets by the end of the year, helping to fuel a global economic recovery as the coronavirus pandemic eases.
But an agreement was scuttled following objections from the United Arab Emirates.
“Unregulated output could mean freedom for all to produce as much as each country sees fit and would be an extremely bearish development for a market that got used to rules and supply quota, in a world still affected by COVID-19,” Dickson said.
“It looks like the market is more worried about a potential crisis at the cartel than it likes the lack of fresh supply coming on in the second half of the year,” Markets.com analyst Neil Wilson remarked.
(With inputs from AFP)
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