Energy

Oil closes Friday slightly lower as OPEC+ talks drag on

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Here's why OPEC+ extended supply talks

Oil prices dipped slightly on Friday after OPEC+ ministers delayed an output policy meeting, with sources saying the United Arab Emirates had balked at proposals that included raising supply by 2 million barrels per day (bpd) by the end of the year.

The Organization of the Petroleum Exporting Countries and allies, known as OPEC+ except for the United Arab Emirates agreed to an easing of cuts and their extension to the end of next year, according to Reuters citing an OPEC+ source. The UAE said the extension is conditional to revising its baseline production, Reuters reported.

OPEC+ ministers ended Friday's meeting without a deal and they will meet again on Monday on oil output policy, CNBC's Brian Sullivan reported.

U.S. West Texas Intermediate (WTI) crude futures settled 7 cents lower at $75.16 a barrel, having jumped 2.4% on Thursday to close at their highest since October 2018.

Brent crude futures were unchanged at $75.84 a barrel, after rising 1.6% on Thursday.

"We're in wait-and-see mode here with OPEC," said John Kilduff, partner at Again Capital in New York. "We'll have to see where the Saudis want to come out in terms of holding the group together."

Both benchmark contracts rose on Thursday after OPEC+ sources said the group aimed to hike output by less than expected and retreated when UAE opposed the proposals, which also included extending the pact on output to the end of 2022.

"If the alliance cracks and breaks up ... the oil market could plunge into a very similar price crash witnessed when Russia 'left' OPEC+ at the March 2020 meeting and triggered a price war," said Louise Dickson, oil markets analyst at Rystad Energy

WTI was on track for a 1.3% rise for the week, with the U.S. crude market expected to tighten as refinery runs pick up to meet recovering gasoline demand.

Brent was heading for a 0.5% fall on the week, reflecting concerns about fuel demand in parts of Asia where cases of the highly contagious COVID-19 Delta variant are surging.

Citi analysts said they did not expect WTI to climb to a premium to Brent because they expected U.S. oil output to pick up at the end of 2021 and grow further in 2022.