Oil reverses gains, turns negative as OPEC+ uncertainty clouds outlook

A tanker truck drives past oil well pump jacks operated by Chevron Corp. in San Ardo, California, U.S., on Tuesday, April 27, 2021.

David Paul Morris | Bloomberg | Getty Images

Oil prices fell more than $1 a barrel on Wednesday in another see-saw trading session, as investors feared this week's collapse in OPEC+ talks could mean more supply, not less, is on the way.

Crude markets have been volatile over the last two days following the breakdown of discussions between major oil producers Saudi Arabia and United Arab Emirates. The market has alternated rallies and selloffs, a signal investors are unclear what the OPEC+ standoff means for worldwide production.

Brent crude settled 1.48% lower at $73.43 per barrel. U.S. West Texas Intermediate shed 1.59% to settle at $72.20 per barrel. Earlier, both benchmarks had jumped $1 a barrel, similar to Tuesday's action.

The Organization of the Petroleum Exporting Countries and its allies including Russia, known as OPEC+, have restrained supply for more than a year since demand crashed during the pandemic.

The group is still maintaining nearly 6 million bpd of output cuts. It was expected to add to supply, but three days of meetings failed to close divisions between Saudis and the Emiratis.

For now, that means the existing agreement - which keeps supply restrained more - remains in force. But the breakdown also could lead producers to start producing more oil, eager to capitalize on the rebound in demand.

"There's a growing sense that the OPEC disarray isn't necessarily bullish for prices after all because the real risk is the whole thing falls apart, becomes a free for all, and a lot more oil potentially gets put on the market," John Kilduff, partner at Again Capital in New York.

Saudi Energy Minister Prince Abdulaziz bin Salman dampened concerns of a price war in an interview with CNBC on Tuesday.

Oil prices were also pressured by a rally in the U.S. dollar, which typically moves inversely with crude prices, Kilduff said.

The first of this week's two reports on U.S. inventories, from the American Petroleum Institute, is out at 4:30 p.m. EDT (2030 GMT). Analysts expect crude stocks to fall by 3.9 million barrels.