Oil prices fell more than $1 a barrel on July 7 in another seesaw 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, signaling investors are unclear on what the OPEC+ standoff means for worldwide production.
Brent crude settled at $73.43 a barrel, falling $1.10, or 1.5%. U.S. West Texas Intermediate settled at $72.20 a barrel, shedding $1.17 or 1.6%. Both benchmarks rallied more than $1 a barrel earlier in the session, 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 coronavirus 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 the Saudis and the Emiratis.
For now, the existing agreement - which keeps supply restrained more - remains in force. But the breakdown also could lead producers, eager to capitalize on the rebound in demand, to start supplying more oil.
"Some people are fearing a production war, but I think most people think that's unlikely," said Phil Flynn, senior analyst at Price Futures Group in Chicago. "It is possible the UAE could leave OPEC and just do it's own thing, and if that happens, then it would be a question of competition for market share."
Russia is now leading efforts to close divisions between the Saudis and UAE to help strike a deal to raise oil output in coming months, three OPEC+ sources said.
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, said John Kilduff of Again Capital in New York 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.