Crude-oil futures turned lower Monday as Saudi Arabia and three
other countries cut ties with Qatar, raising some concerns
about Middle East oil production.
Saudi Arabia, Egypt, Bahrain, and the United Arab Emirates all
severed diplomatic ties with Doha on
Monday, accusing it of meddling in their internal affairs
and backing terrorism, which the country denies.
Last month, Qatar’s state-controlled news agency posted
comments purportedly from its emir that praised Iran and called
Hamas the legitimate representative of the Palestinian people.
Qatar said its state news agency had been hacked, but Saudi
Arabia, the U.A.E., Bahrain and Egypt nevertheless blocked the
websites of several Qatari news outlets.
Oil prices reversed a gain of more than 1% seen earlier in the
European session and in Asian trading. On the New York
Mercantile Exchange, light, sweet crude futures for delivery in
recently traded down 28 cents, or 0.6%, at $47.38 a
barrel on the session. August Brent crude
on London’s ICE Futures exchange slipped 40 cents, or
0.8%, to $49.55 a barrel.
The Qatar conflict developments aren’t expected to have a
direct impact on oil production and exports, said Phin Ziebell,
an economist at National Australia Bank. Qatar is a member of
the Organization of the Petroleum Exporting Countries but isn’t
a significant crude producer, market strategists said.
‘This means Qatar may have little reason to keep the production
quota and if that happens, it might encourage other OPEC members
to cheat too.’
— Phin Ziebell, National Australia
Still, market participants will be closely Qatar for further
developments in the region that could prove significant for
“This means Qatar may have little reason to keep the production
quota and if that happens, it might encourage other OPEC
members to cheat too, ” said Ziebell.
Late last year, OPEC and other non-OPEC members agreed to cut
its production by 1.8 million barrels a day to reduce a supply
glut. At first, the move lifted global prices, but much of
those gains have been erased due to rising output from the U.S.
and Libya. The program of cuts has been extended to next March.
Oil has taken a beating, dropping more than 4% last week, the
largest weekly decline since early May. Sentiment deteriorated
further after data from industry group Baker Hughes on Friday
showed U.S. oil drillers adding 11 more active rigs in the week
ended June 2.—a 20th consecutive weekly rise.
U.S. crude production has averaged more than 9.3 million
barrels a day for four straight weeks. The government now
expects production to reach nearly 10 million barrels a day
Meanwhile, the head of Russia’s largest oil producer, Rosneft,
expressed doubt that the OPEC cuts would lift oil prices in the
long run. He said producers who weren’t included in the
reduction pact, like Nigeria and Libya, have been actively
“A number of large-scale oil producers that do not take part in
these agreements use such conditions to strengthen their market
positions, and that leads rather to new imbalance than to the
sustainable development,” said Rosneft Chief Executive Igor
Sechin, at an energy conference in Russia over the weekend.
Nymex reformulated gasoline blendstock for July
—the benchmark gasoline contract—rose 63 points to
$1.5834 a gallon, while July diesel traded at $1.4957, 109
points higher. ICE gasoil for June changed hands at $444.00 a
metric ton, up $5.50 from Friday’s settlement.