Crude oil prices recover from last week’s losses, as seven Arab nations cut ties with Qatar. How long will the oil rally last?
5 June, AtoZForex – Oil prices climbed on Monday, as seven Arab countries have decided to cut diplomatic ties with Qatar. The decision was followed by the raise in the tensions in the biggest oil-producing region in the world.
Recent oil drops
Saudi Arabia, Egypt, the United Arab Emirates, Yemen, Maldives, Libya and Bahrain expressed their willingness to suspend air and sea travel to and from Qatar. Last week, oil prices have slid on the concerns that increasing US oil supply will offset the supply cuts by the Organization of the Petroleum Exporting Countries (OPEC). In fact, the crude oil has slipped to below $50 a barrel amid worries that OPEC cuts will not be enough to shrink global oil glut. An analyst in Sydney at Australia & New Zealand Banking Group Ltd, Daniel Hynes, has stated:
“On the face of it, it could present a risk, but I don’t think there is too much in the Qatar situation. Geopolitical risks haven’t really been that influential in recent times and I don’t think that will change too much.”
This Monday, the oil futures rebounded by 1.6 percent in the New York, healing the biggest weekly loss in a month.
Crude oil rebounds as Arab nations cut ties with Qatar
This decision by seven Arab countries did not largely affect the shipments. Yet, it has raised the chances of the supply disruptions from the Middle East. This includes the output from several OPEC countries, such as Saudi Arabia, Iran, and Qatar.
The countries are all using the Strait of Hormuz. This straight is allowing transportation between the Persian Gulf and the Gulf of Oman. Moreover, according to the US Department of Energy data, this straight is accounting for about 30 percent of seaborne oil trade passes.
On the New York Mercantile Exchange, July West Texas Intermediate (WTI) rose as much as 76 cents to $48.42 a barrel. It then slipped to $48.20 by 2:43 PM on Hong Kong. The overall volume traded accounted for about 53 percent above the 100-day average.
August Brent price chart
On the London-based ICE Futures Europe exchange, August Brent rise 57 cents to $50.52 a barrel. Last week, prices of this commodity fell 4.2 percent.
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