Oil prices dip on fears Middle East rift could harm OPEC cuts

OPEC's efforts to tighten the market could be undermined by US production, which the EIA said could hit a record 10 million bpd next year, up from 9.3 million bpd now.

Furthermore, the Organisation of Oil Producers and Exporting Countries (OPEC) and some non-OPEC producers agreed to extend supply cuts of 1.8 million barrels per day until the end of March 2018 at a meeting in Vienna on 25 May 2017.

Crude oil prices declined in the previous session after rifts emerged among key members of the Organization of Petroleum Exporting Countries.

Since OPEC announced the extension of production cuts, the market has continued to react bearishly with respect to the oil price.

Moreover, data from industry group the American Petroleum Institute had suggested on Tuesday that USA crude inventories fell by 4.6 million barrels.

USA 10-year Treasury yields, which fell on Friday, were up 1.6 basis points at 2.175 percent.

"The market is still awash in oil, and it's waiting to see more concrete signs of global oil inventories declining", oil market analyst Andy Lipow told the Houston Chronicle. The market expectation for crude stocks was a decline of 3.5 million barrels.

In December 2016, OPEC and non-OPEC producers reached their first deal since 2001 to curtail oil output jointly and ease a global glut after more than two years of low prices.

Oil traded little changed as diplomatic efforts to resolve a clash between Qatar and Saudi Arabia played out, with crude supplies seen as unaffected.Futures slipped as much as 1% in NY.

Brent crude prices fell $2.06, or 4 percent to settle at $48.06 a barrel. The United States has been the world's top producer of natural gas since 2009, when US natural gas production surpassed that of Russian Federation, and it has been the world's top producer of petroleum hydrocarbons since 2013, when its production exceeded Saudi Arabia's.

Kuwait Oil Minister Essam al-Marzouq said Qatar was committed to an OPEC agreement to restrict supply, telling Kuwaiti state news agency KUNA Doha was complying with its obligations.

Saudi Arabia and three other Arab countries severed most diplomatic and economic ties to Qatar to punish the nation for its links with Iran and Islamist groups.

OPEC also inadvertently contributed to the deluge of oil in storage.

Crude oil futures snapped back Tuesday amid speculation recent losses were overdone.

Gold hit a six-week high of $1,282 an ounce, with traders citing the U.S.jobs report and reduced prospects of aggressive Fed rate increases.

Still, Standard Chartered analysts said their market balance projections indicated a 1.4 million barrels a day global supply deficit in the second half of the year, even allowing for a rapid increase in USA output.

  • Julie Sanders