According to media reports, the official reason for the breakdown of the July OPEC+ meeting, which was postponed for several days in a row and was eventually called off indefinitely, was the tough and uncompromising position of the UAE Oil Minister Suhail Al Mazrouei, who insisted that the alliance should raise oil production in August only if the extension of the OPEC+ deal after April 2022 was canceled. The leaders of OPEC+, Russia and Saudi Arabia, who insisted that production be lifted in August and the deal be extended after April 2022, failed to persuade the unyielding Emirates.
The oil market rallied in reaction to the failure of the OPEC+ meeting and uncertainty over the date of the next meeting. Thus, by the close of trading on July 5, the Brent price surged by almost 3% compared to June 30 and exceeded $76/bbl. However, on July 6, a correction set in and Brent shed almost 2.9%, in just one day, leaving no trace of the previous week’s big bull run. In all likelihood, the market was impacted by news that representatives of the Biden administration were holding talks with some (unnamed) OPEC+ representatives, raising concerns in the market about political pressure from the US, which is interested in curbing inflation and reining in rising energy prices, on OPEC+.
The political weakness of OPEC+ may well point to the alliance's limited ability to regulate the market, as well as a trend whereby the alliance is forced to retreat at every shout from the White House. That said, the Russian media reported that the OPEC+ ministerial meeting might still take place in mid-July, although neither Russia’s Energy Ministry nor OPEC has officially confirmed such reports. Expectations that OPEC+ will muster the stamina (primarily due to the mutual agreement of the largest oil exporters - Russia and Saudi Arabia) to withstand pressure from the US as well as OPEC's projected oil shortage may act as bullish factors for oil prices.
We expect Brent to trade in the range of $73-80/bbl until the end of July.