Oil prices continue to decline with both Brent crude and US West Texas Intermediate (WTI) crude seeing 8-9% per cent decline over previous closes.
According to trader reports, Brent crude was trading at $49.10 per barrel at 0244 GMT, down 37 cents, or 0.8 percent from their last close, while U.S. West Texas Intermediate (WTI) crude had dropped 36 cents, or 0.8 percent, to $47.04 per barrel.
This is the third straight day of decline with concerns that a political rift between Qatar and several Arab states would undermine an OPEC-led push to tighten the market. Persistent gains in U.S. production also dragged on benchmark crude prices, traders said.
Saudi Arabia, UAE, and Egypt have cut ties with Qatar citing the country’s stand on extremism and support for Islamist militants and Iran. Steps taken include preventing ships coming from or going to the small peninsular nation to dock at Fujairah, in the UAE, used by Qatari oil and liquefied natural gas (LNG) tankers to take on new shipping fuel.
Analysts said that the current dispute goes much deeper than a similar rift in 2014.
With oil production of about 620,000 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 cartel could weaken an agreement to hold back production in order to prop up prices.
Although Qatar is a small oil producer, other OPEC states could see such an action as a reason to stop restraining their own output, traders said.
Worries over the outlook for OPEC’s drive to rein in production come amid bulging supplies from elsewhere, especially the United States.
U.S. crude production has jumped over 10 percent since mid-2016 to 9.34 million bpd < C-OUT-T-EIA> levels close to top producers Russia and Saudi Arabia.