US oil benchmark hits 2014 peak after OPEC+ talks fail

London: The US benchmark oil price WTI briefly spiked to near a seven-year peak on Tuesday after OPEC+ crude producers failed to agree on lifting output, sparking fresh inflationary fears.

West Texas Intermediate (WTI) crude for August delivery leapt to $76.98 per barrel, a level last seen in November 2014, before falling back to below $75 as trading continued.

The price of Europe´s Brent North Sea oil advanced to a November 2018 peak at $77.84.

The OPEC+ group on Monday cancelled a planned meeting that was supposed to overcome an impasse between the United Arab Emirates and other members on how to lift output. No new date has been set.

"Oil advanced... as OPEC+ abandoned its July meeting, after the UAE stood its ground over production increases," said Markets.com analyst Neil Wilson.

"The failure to agree to increasing production in August and beyond leaves the market even more in deficit than before, so... WTI spiked to a near seven-year peak this morning close to $77."

Oil producing nations have slowly lifted output in recent months after turning the taps down last year in response to a collapse in prices caused by coronavirus lockdowns.

With demand rocketing on the back of the global rebound -- and the US holiday driving season under way -- officials had planned to hike output each month by 400,000 barrels a day from August to December. However, no new supplies will be forthcoming.

The breakdown of talks between OPEC and other key crude nations raised the possibility of oil hitting $100 -- a level also not seen since 2014.

"Some speculators believe that given the strong economic recovery that we are experiencing around the globe, it may not be a surprise if Brent oil comes close to $100," said AvaTrade analyst Naeem Aslam.

The countries have been slowly lifting production in recent months after turning the taps down last year in response to a collapse in prices caused by coronavirus lockdowns.

With demand rocketing on the back of the global rebound -- and the US holiday driving season under way -- officials had planned to hike output by 400,000 barrels a day each month from August to December, but the deadlock means no new supplies will be forthcoming.

But while prices are spiralling higher, analysts said there were several possible scenarios. In one, there is no deal and no increase in production, sending oil prices shooting up, while another sees the grouping falling apart and countries fighting for market share by slashing prices.

"The failure of OPEC+ to come to an agreement will only add further uncertainty to the oil market," said Warren Patterson from ING Group NV.

"Assuming we don´t get a quick resolution, the uncertainty over OPEC+ output in the months ahead does suggest increased volatility." The spike in oil prices has reignited fears about strong inflation, which could force central banks to hike interest rates earlier than thought -- and potentially derail the post-Covid recovery.

Rallying commodity prices have already played a key role in rebounding consumer prices in recent months. "Surging oil prices are not good news for the global economic recovery," said OANDA analyst Sophie Griffiths.