Oil prices gain as Saudi Arabia cuts ties with Qatar
- Author: Zachary Reyes Jun 08, 2017,
Jun 08, 2017, 17:13
CL.1) dropped more than 4 percent as stockpiles of oil in the United States surged by 3.3 million barrels in the week ended June 2, according to the Energy Information Administration.
Focus is likely to shift to USA inventories ahead of government data Wednesday.
USA light crude was down 20 cents at US$47.20. In addition, OPEC is allowing Iran to continue to increase its production levels up to 3.797 million barrels per day. Rigs in the US have more than doubled in the past year, according to Baker Hughes Inc., with Texas' prolific Permian Basin leading the surge.
With oil production of about 620,000 barrels per day (bpd), Qatar is one of the smallest crude producers in the Organisation of the Petroleum Exporting Countries, but some investors fear tension within the cartel could weaken its agreement to hold back production in order to prop up prices.
Last weeks' decision from U.S. President Donald Trump to start the process of ending the country's involvement in the Paris climate treaty created negative headwinds for oil prices because it added impetus to pro-oil policies in a country seen as counter-balancing OPEC's efforts through gains in shale production.
Oil has struggled to stay above $50 a barrel amid speculation that rising USA output will counter supply curbs by the Organization of Petroleum Exporting Countries and its partners, including Russian Federation. August Brent crude LCOQ7, +0.87% on London's ICE Futures exchange rose 36 cents, or 0.8%, to $48.42 a barrel. In 2017, United States crude oil output could average around 9.3 million barrels per day.
"We are at this stage holding the line nervously near the low levels" of Wednesday's session, said Ben Le Brun, market analyst at OptionsXpress in Sydney, as quoted by Reuters. This outlook takes into account recent agreements among OPEC member countries, as well as pledges by key non-OPEC producers, including Russian Federation, to restrain production.
Analysts said that the current dispute goes much deeper than a similar rift in 2014.
"For the OPEC-led deal to succeed, we need to see a greater export focus and greater compliance amongst accord members", said Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia.
For the past week, crude imports averaged more than 8.3 million barrels a day, up by about 356,000 barrels a day compared with the previous week.