Oil falls 1% on fears West Asia rift could harm Opec cuts

Oil prices fell about 1 per cent on Monday on concerns that the cutting of ties with Qatar by top crude exporter Saudi Arabia and other Arab states could hamper a global deal to reduce oil production.

Saudi Arabia, the United Arab Emirates, Egypt and Bahrain closed transport links with top liquefied natural gas (LNG) and condensate shipper Qatar, accusing it of supporting extremism and undermining regional stability.

The news initially pushed Brent crude prices up as much as 1 per cent as geopolitical fears rippled through the market. But Brent later reversed gains, trading down 58 cents, or 1.12 per cent at $49.37 a barrel by 10:42 am EDT (1442 GMT).

US West Texas Intermediate futures were at $47.15 a barrel, down 51 cents, or 1.1 per cent.

With production capacity of about 600,000 barrels per day (bpd), Qatar’s crude output ranks as one of Organization of the Petroleum Exporting Countries (Opec)’s smallest, but tension within Opec could weaken the supply deal, aimed at supporting prices.

“While we would not want to read too much into this in terms of looming trouble for Opec, the fact that Qatar’s stance towards Iran is a key element in this issue does make for a potentially more complicated setup at future meetings should the issue not have been resolved in due time,” JBC Energy analysts said in a note.

There are already doubts that the effort to curb production by almost 1.8 million bpd is seriously denting crude exports.