Oil's Bull Run Weakens As OPEC+ Uncertainty Lingers

Oil prices are being shaken by uncertainty over supply following a collapse of talks among major oil producers which could cripple the current output agreement.

Brent crude oil futures edged higher by 2 cents to $73.45 a barrel by 05:13 WAT after earlier falling to as low as $72.93. U.S. West Texas Intermediate futures were down 10 cents, or 0.1%, at $72.10 a barrel.

Brent prices have fallen nearly 5% since Monday's close after talks between the Organization of the Petroleum Exporting Countries and its allies, including Russia, known as OPEC+, fell apart when de facto leader Saudi Arabia refused demands from the United Arab Emirates to raise its output under the group's supply cut agreement.

OPEC+ has restrained supply for more than a year since demand crashed during the coronavirus pandemic.

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

Russia is trying to mediate between Saudi Arabia and the UAE to help strike a deal to raise oil output, three OPEC+ sources said on Wednesday.

Prices found some support from a large drop in oil inventories in the United States.

Oil stockpiles in the world's biggest oil user fell by 8 million barrels for the week ended July 2, according to two market sources, citing American Petroleum Institute figures, compared with an estimate of a 4 million barrel fall by analysts in a Reuters poll.

Government inventory data is due on Thursday, pushed back a day following the U.S. Fourth of July holiday on Monday.

U.S. oil production declines this year are expected to lessen with the Energy Information Administration (EIA) saying on Wednesday that output will be 11.10 million bpd in 2021, down by 210,000 bpd from 2020, versus its previous forecast for a drop of 230,000 bpd.

Concerns over the coronavirus, however, weighed on prices, with Japan, the world's fourth-largest oil user, set to declare a state of emergency for the Tokyo area through August 22 amid a new wave of infections and South Korea reporting its highest ever daily COVID-19 cases.