Oil rebounded after a Saudi-led alliance cut diplomatic ties with Qatar and moved to close off access to the Gulf country, raising tensions in the world’s biggest oil-producing region.
Futures rose as much as 1.6 percent in New York, after capping the biggest weekly loss in a month on Friday. Saudi Arabia, Bahrain, the United Arab Emirates and Egypt said they will suspend air and sea travel to and from Qatar, escalating a crisis that started over its relationship with Iran. Prices slumped last week amid concern that rising US supplies will undercut output curbs by OPEC and its partners.
While the spat between the countries hasn’t affected shipments yet, it raises the prospect of supply disruptions from the Middle East, including OPEC members Saudi Arabia, Iran and Qatar. Oil had slipped below $50 a barrel amid speculation that an extension of output cuts by the Organization of Petroleum Exporting Countries and its partners including Russia won’t be enough to shrink global inventories amid rising US drilling activity.
“On the face of it, it could present a risk, but I don’t think there is too much in the Qatar situation,” said Daniel Hynes, an analyst in Sydney at Australia & New Zealand Banking Group Ltd. “Geopolitical risks haven’t really been that influential in recent times and I don’t think that will change too much.”
West Texas Intermediate for July delivery climbed as much as 76 cents to $48.42 a barrel on the New York Mercantile Exchange and was at $48.26 by 11:59 a.m. Hong Kong time. Total volume traded was about 28 percent above the 100-day average. Prices lost 70 cents, or 1.5 percent, to $47.66 on Friday, slumping 4.3 percent for the week.
Brent for August settlement added 60 cents to $50.55 a barrel on the London-based ICE Futures Europe exchange. Prices fell 4.2 percent last week. The global benchmark crude traded at a premium of $2.09 to August WTI.
“The extension of OPEC cuts has provided a fairly solid support level for Brent around $50 a barrel, so anytime it dips below that, I think we’ll see buying come back fairly quickly,” said Hynes.
Drillers targeting crude in the US added rigs for the 20th straight week to the highest level since April 2015, according to data Friday from Baker Hughes Inc. American producers are pumping at a rate of 9.34 million barrels a day, according to data from the Energy Information Administration.
“The threat of increased US production may fade somewhat if prices fall to the mid-to-low $40s,” said Ric Spooner, an analyst at CMC Markets in Sydney. “The market will be watching to see if prices can form a bit of a base around this level. If they do fall, they’re unlikely to drift too much lower.”
The OPEC-led deal to curb output won’t stabilize the market over the long term as US shale fills the supply shortfall, according to the chief executive officer of Russia’s Rosneft Oil Co. PJSC.
Saudi Arabia raised pricing for July sales of all crude grades to Asia, the US and Northwest Europe as it seeks to take advantage of increased demand after supplies extended output cuts.
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