Earlier last month, oil prices hit their highest levels in the last three years after the world’s major oil producers announced they had decided to keep a cap on crude supplies. Brent crude went up by 40 cents, standing at $81.66 a barrel and U.S. West Texas Intermediate (WTI) oil rose 30 cents to $77.92 per barrel.

OPEC+ said that it will maintain an agreement to increase oil production only gradually, as the world recovers from the Covid-19 pandemic. Reports suggest that oil prices have already surged more than 50 percent in 2021. This has resulted in inflationary pressures that worry crude-consuming countries like the US and India, worrying that increased oil prices might derail the recovery from the pandemic.

Even though OPEC+ has received a lot of pressure to increase its production, OPEC+ was concerned that a fourth global wave of Covid-19 could hit the demand recovery. Despite a lot of talks about demand and supply shortage, Russian Deputy Prime Minister Alexander Novak said that he believes the market is now balanced.

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Brent crude oil decreased by 0.1 percent at $76.41 a barrel and West Texas Intermediate showed a drop of 0.2 percent at $75.12 a barrel, having jumped 1.6 percent in the previous session. China’s crude import also fell by 3 percent from January to June compared with a year earlier. This is the first recorded major contraction in oil since 2013 as factors like import quota shortages, refinery maintenance and rising global prices affect the buying process.

Eurasia Group released a statement saying,” Imports were scaled back as surging prices for crude oil have eroded refinery profit margins.” They also mentioned that high oil prices may lead to more cost-sensitive emerging markets, especially India, where there is a surge in oil prices almost every other day.

Additionally, there have also been major disagreements over supply policy within the Organization of the Petroleum Exporting Countries (OPEC). The International Energy Agency also mentioned that global withdrawal from storage in the third quarter was set to be the most in at least a decade. The US stockpile of oil and gas inventories also witnessed a drop last week where crude inventories dropped by 4.1 million barrels for the week ended July 9, signifying their eighth straight weekly fall.

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Credit Suisse analysts said in a report on Sunday, “Importantly, OPEC needs a consensus of all members to officially change its output policy, leading some to believe it may end in a broken meeting.”

Analysts say Saudi Arabia would like to initially return just 500,000 and watch the market before adding more, while Iran and Venezuela want to keep the status quo.”There’s a big push to get more oil on the market in this Q3 period, so they can avoid a price spike and tightness in the market,” said John Kilduff of Again Capital. Oil use inside of Saudi Arabia rises sharply in the summer months, as the kingdom burns crude to meet its higher electricity demand and it typically sends less to the world market. That coincides with the tail end of the U.S. summer driving season, another big period for stronger demand.

Oil prices have already been swinging ahead of the OPEC meeting. Brent crude, the international benchmark, rose above $75 per barrel on Monday, a gain of better than 2.7 percent, after falling sharply on Friday. Oil moved higher on a news report that OPEC could raise production by 300,000 to 600,000 barrels a day, less than many expected.

“Here they are moving into summer term, which is a high-demand quarter, and now they want to basically make sure that the decision that they make in the June meeting does not involve basically taking oil prices once again towards $80 or above because that could potentially basically counteract what they had initially done, [which] was to balance the market,” said Abhishek Deshpande, J. P. Morgan’s senior oil analyst, on CNBC’s Power Lunch.

Analysts who watch OPEC also don’t agree on how much oil could come back on the market. Macquarie Research said the events in Vienna this week could be bearish, or negative for oil , and it expects an 800,000 barrel a day increase in production, which could dent prices by $2 to $4 a barrel. There could be a $6 to $8 decline if 1 million barrels a day were returned instead, they added.

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