Can crude oil hit $80 per barrel next week?

OPEC and its allies (led by Russia), termed OPEC+, have been meeting virtually and will meet for a final time on Monday to decide on whether to boost production or not.

On Friday, when equities and gold rose sharply, oil had a subdued reaction. The reason was this ongoing meeting where the market is expecting some sort of production boost to meet extremely high demand.

There are 2 things that are holding back OPEC+ from any agreement -

1. OPEC and Russia-led allies are not agreeing over the extent of demand going forward and therefore the number of barrels per day which they have to boost production.
2. UAE wants a higher share of the output since it had cut production more than other OPEC members, especially Saudi Arabia, in April-20 when COVID-led shutdowns of economies had killed oil demand.

G7 economies across the globe want production to increase to prevent oil from going higher as it will trigger high inflation in those countries. The US has been vocal about wanting a deal as oil prices, even at the current level, are worrisome.

While an output increase of 400k barrels per month between August and December may just be enough to tame crude oil, any deadlock on Monday will surely send Crude Oil beyond $80 per barrel in the near term.

OPEC+ is incentivized to slowly increase production to boost government revenues. The deadlock is mainly from UAE's side and their demands will be opposed by the Saudis. Then there are concerns about the newer COVID variants and increased output from Iran. A triple-digit price of Crude is also not a scenario OPEC+ wants as it furthers the agenda of renewable energy.

The outcome on Monday will be very important for the direction of Crude Oil prices and how badly inflation is likely to screw us in the future.