Oil futures fell sharply Wednesday, giving up early gains to end lower as traders monitor a standoff continues between the United Arab Emirates and fellow OPEC members over a proposed output rise.

West Texas Intermediate crude for August delivery


fell $1.17, or 1.6%, to close at $72.20 a barrel on the New York Mercantile Exchange. September Brent crude

the global benchmark, lost $1.10, or 1.5%, to settle at $73.43 a barrel on ICE Futures Europe.

Oil trading has been volatile after talks by the Organization of the Petroleum Exporting Countries and its allies — a group known as OPEC+ — collapsed on Monday, derailing a proposal to ease existing output curbs in a controlled manner and allow production to rise by 400,000 barrels a day each month from August through December.

Read: What the OPEC standoff means for oil prices and financial markets

Crude oil prices initially rallied on expectations that production wouldn’t rise even as demand accelerates this year, with WTI hitting a 6 1/2-year high and Brent trading at its highest since 2018. But markets turned down during Tuesday’s sessions on worries the impasse, which centers on a call by the United Arab Emirates to raise the baseline that determines its output, could lead producers to open the taps and flood the market with crude.

Analysts said crude prices saw renewed pressure on Wednesday after The Wall Street Journal published an article describing the U.A.E.’s desire to boost market share, underlining its rift with Saudi Arabia and the rest of OPEC.

The article underscores market fears that the U.A.E. may “want out of OPEC so it can pump 4 million barrels a day and make hay while sun shines,” said Phil Flynn, market analyst at Price Futures Group, in a phone interview.

In One Chart: OPEC oil stalemate — here’s why U.A.E. is blocking a deal

Flynn said the market is also suffering a bout of volatility not unlike what is often seen around the Independence Day holiday. In the short term, technical factors and worries that the stalemate could spark a jump in production are likely to hang over the market, but longer term demand dynamics remain favorable for crude, he said.

Barring another full-scale production war such as that seen last March between Saudi Arabia and Russia, the market will be likely to need any additional barrels it can get as the global economy picks up steam, he argued.

But other analysts remain cautious.

“It is true that Saudi Arabia has raised its official selling prices for Asian customers in August, signaling that it is willing to continue complying with the agreement,” said Eugen Weinberg, commodity analyst at Commerzbank, in a note. “However, several members of the alliance would prefer to step up their production as soon as possible — even at the expense of the others.”

Reuters, citing OPEC+ sources, reported that Russia is leading an effort to close divisions between the Saudis and the U.A.E.

On the bullish side, analysts expect U.S. data to show a seventh straight weekly decline in crude inventories. The American Petroleum Institute is expected to release its weekly tally late Wednesday, while official data from the Energy Information Administration is due Thursday.

Analysts surveyed by S&P Global Platts, on average, look for U.S. crude stocks to show a fall of 6.2 million barrels in the week ended July 2, with demand from refineries expected to outpace production growth.

August gasoline futures

fell 1% to close at $2.206 a gallon, while August heating oil

shed 0.8% to finish at $2.0891 a gallon.

August natural-gas futures

fell 1.1% to $3.596 per million British thermal units.

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