Oil prices hover above $75 as OPEC+ struggles to reach a deal. Here’s why it matters

Energy prices are hovering above the $75 level after OPEC and its allies could not reach a key deal on their oil output policy last week, amid rising tensions between Saudi Arabia and the UAE.

Crude prices are seeing some volatility after an initial spike, but retreated slightly on Monday. Brent futures slipped 0.11% to $76.09 per barrel, while U.S. crude futures dipped 0.13% to $75.06 per barrel.

The energy alliance, often referred to as OPEC+, will meet again on Monday after failing to reach a deal twice last week.

Without a deal, oil prices could surge and threaten to derail a frail economic recovery. If talks fall through, there could also be a price war — though analysts do not think the latter scenario is likely.

The United Arab Emirates blocked a deal to increase oil output and extend the expiry of the groups broader production supply agreement to the end of next year, according to Reuters. The UAE said the extension should be conditional on revising the so-called baseline, which determines how much a country is allowed to pump.

Both Brent and U.S crude shot up more than 2% to above $75 per barrel on Thursday, reaching highs not seen since 2018. The deal first fell through on Thursday, and a second meeting on Friday failed to see any breakthrough as well.

Oil prices have surged more than 45% in the first six months of 2021, with demand rising as global economies reopened.

Why oil prices spiked

The UAE — a long-time ally of OPECs leader Saudi Arabia — objected to the deal twice last week, according to Reuters.

The deal includes an agreement to increase oil output gradually, while at the same time, extending the duration of broader cuts that the group agreed to in 2021.

Last year, to cope with lower demand as the Covid crisis hit and people travel less, OPEC+ agreed to curb output by almost 10 million barrels per day from May 2020 to the end of April 2022.