OPEC and non-OPEC ministers postponed oil output negotiations on Monday for the second day in a row, after the organization failed to negotiate on an oil output policy.

On Friday afternoon, the energy alliance convened through videoconference to determine whether to maintain the current production strategy or increase supplies considerably. However, the meeting was postponed until Monday because the United Arab Emirates refused to agree to an eight-month extension of output limitations. However, the meeting on Monday was similarly stalemate.

After two days of unsuccessful negotiations last week, Energy Minister Prince Abdulaziz Bin Salman appealed for "compromise and reason" on Sunday to achieve a settlement.

Except for one country, the Minister stated in an interview with Al-Alrabiya TV on Sunday that there has been cooperation among OPEC+ nations on extending the OPEC+ accord. “Saudi Arabia and Russia are allies in the initiative to prolong the OPEC+ agreement and boost production,” stated Prince Abdulaziz.

However, OPEC+ sources stated on Monday that there's been no advancement in addressing the issue, and the meeting on Monday had been canceled. There was no contract on a new date.

The collapse of the negotiations implies that the planned rise in output from August will not take place, according to the sources, pushing up the price of international benchmark Brent oil that was traded 1% higher at $76.95 a barrel.

Oil prices have already sparked fears that inflation could hinder the worldwide recovery from the epidemic.

The disputes within OPEC+, which have dragged policy discussions since Thursday, have contributed a major twist of uncertainty for traders, and prices are increasing on the risk of a no-deal, which could prevent the market of the additional barrels that it anticipates from the alliance beginning in August.

Oil market tensions were not this high since the March 6, 2020 split, and the unpredictability is propelling prices over 2-year highs in the near short term.

The reason a no-deal is positive for the market is that, unlike the last split in March 2020, if OPEC+ members won't agree on a new pact, they are still bound by the existing agreement, which would not instantly accommodate for more output beyond July.

With current balances and a spike in summer oil demand, even increasing output by 500,000 bpd in August is optimistic. Maintaining OPEC+ production at July levels is fairly optimistic owing to the undersupply that such a situation would produce this summer.

The crux of the OPEC+ rift is that now the UAE is pressing for increased output, a demand that Russia discreetly supports mostly on the sidelines while Saudi Arabia vehemently opposes in public.

If the UAE is granted relief from its production restrictions, it is probable that some other supply-hungry nations, such as Russia and Iraq, will be willing to negotiate supply rises as well.

If the UAE and other nations are permitted to increase their output, the cautious posture that OPEC and Saudi Arabia want would be swept away, and prices will fall.

The group is at a standstill as the UAE continues to press for a bigger production quota, which, if given, would almost certainly have to include the other supply hawk nations too. A combined quota rise might lead to an increase of more than the 500,000 bpd initially predicted by the market.

An early August supply increase of more than 500,000 bpd from OPEC+ should theoretically help to bring the market balance closer to equilibrium, and it might even be a premature action in light of the extremely infectious Delta virus, which is prompting Asian countries to tighten social separation measures.

If an increase of 600,000 to 1,000,000 bpd in August is contemplated, prices may suffer a moderate drop because of this.