Oil prices dip on fears
Middle East spat could harm OPEC cuts
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[June 05, 2017]
By Stephen Eisenhammer
(Reuters) - Oil prices reversed gains to trade down 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
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
The move pushed Brent crude prices up as much as 1 percent, before
paring gains to trade down 30 cents at $49.65 a barrel at 1046 GMT (6:46
U.S. West Texas Intermediate futures were at $47.40 a barrel, down 26
With a production capacity of about 600,000 barrels per day (bpd),
Qatar's crude output is one of OPEC's smallest but tension within the
Organization of the Petroleum Exporting Countries could weaken the
supply deal, aimed at supporting prices.
"I think it's still going to be a bit of a debate on the true impact it
can have on the oil market," said Olivier Jakob, strategist at
"In terms of oil flows it doesn't change very much but there is a wider
geopolitical impact one needs to consider," Jakob added, explaining that
a breakdown in relations between Qatar and Saudi Arabia could make the
OPEC-led agreement on production cuts less effective.
There are already doubts the effort to curb production by almost 1.8
million bpd is seriously denting exports.
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A man fills up his car at a petrol station in Rome January 6, 2015.
there was a dip in OPEC supplies 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 are still down about 7 percent from their open on May 25, when
OPEC opted to extend production cuts into 2018.
Crude output in the United States, which is not participating in the cuts, has
jumped more than 10 percent since mid-2016 to 9.34 million bpd, close to levels
of top producers Saudi Arabia and Russia.
The rise in U.S. 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.
"Investors continue to doubt the ability of OPEC to rebalance the oil market,
with crude oil prices remaining under pressure amid further signs of rising U.S.
oil production," ANZ bank said.
(Additional reporting by Roslan Khasawneh and Henning Gloystein; Editing by Dale
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