Oil falls 1% on fears Mideast rift could harm OPEC cuts
NEW YORK: Oil prices fell about 1 percent 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 UAE, 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 percent as geopolitical fears rippled through the market. But prices fell 65 cents, or 1.3 percent, to $49.30 a barrel by 1:00 p.m. EDT (1700 GMT).
US West Texas Intermediate (WTI) futures traded at $47.17 a barrel, down 49 cents, or 1.03 percent. US gasoline futures led the energy complex lower, falling about 2.4 percent to $1.5390 a gallon, on technical selling, brokers said.
With the production capacity of about 600,000 barrels per day (bpd), Qatar’s crude output ranks as one of the smallest among the Organization of the Petroleum Exporting Countries (OPEC), but tension within the alliance could weaken the supply deal aimed at supporting prices.
The deal has shown little indication of significantly denting exports. While OPEC supplies dipped between February and April, a report on Monday by Thomson Reuters Oil Research said OPEC shipments likely jumped to 25.18 million bpd in May, up over 1 million bpd from April. Brent futures have fallen more than 8 percent from their open on May 25, when OPEC opted to extend production cuts into 2018. Outside of OPEC, South Sudan will drill 30 new wells this year and significantly boost oil output as it chases a peak 350,000 bpd target by mid-2018, the petroleum minister said on Monday. However, some of Monday’s price losses were limited as Libya’s crude production was pegged at 809,000 bpd on Monday, down from 827,000 last week due to technical issues, a Libyan oil source told Reuters. Crude output in the US, meanwhile, has jumped more than 10 percent since mid-2016 to 9.34 million bpd. The rise in US production has been driven by a record 20th straight weekly climb in oil drilling, with the rig count climbing by 11 in the week to June 2, to 733, the most since April 2015. “We believe that US inventories will continue falling this summer, allowing OPEC to point to lower stocks as a positive measure of success,” Sandy Fielden, director of oil and products research at Morningstar, said in a note.