Wed, Nov 08, 2017 - Page 10 News List

Oil prices surge as Iran, Saudi Arabia trade barbs

AFP, SINGAPORE

Oil prices made rapid gains overnight as geopolitical tensions surged between Saudi Arabia and Iran, sparking fears of a conflict that could disrupt supplies from two major producers.

However, prices retreated slightly in early Asian trade yesterday as traders engaged in profit-taking after both products reached levels not seen in more than two years.

“Tensions between Iran and Saudi Arabia look to be a major disruptor, with markets concerned that supply could be cut off should there be any conflict,” Sydney-based ASR Wealth Advisers equities and derivatives adviser Shane Chanel said.

Riyadh and Tehran have been trading fierce accusations over their involvement in Yemen, where Sunni-ruled Saudi Arabia and predominantly Shiite Iran back opposing sides.

In the latest flare-up, Saudi Arabia said an intercepted missile attack on the country, allegedly by Tehran-backed rebels in Yemen, “may amount to an act of war.”

Tehran in turn accused Riyadh of committing war crimes in Yemen, raising tensions further.

However, Chanel said that the accusations were unlikely to spiral into full-blown conflict.

At about 3:30am GMT, US benchmark West Texas Intermediate was up US$0.04 to US$57.39 per barrel, while Brent crude was down US$0.08 to US$64.19 per barrel.

In the midterm, prices are likely to continue gaining ground with an OPEC-led cap on supplies likely to continue into next year, AxiTrader chief market strategist Greg McKenna said.

“The Russians have been a very important driver in OPEC solidarity by agreeing to play ball, but also threatening to push up production had the agreement fallen through,” McKenna added.

Crude has been on an upward trajectory over the past few months as major oil producers, led by Saudi Arabia and Russia, struck a historic deal last year to cut output by 1.8 million barrels per day for six months.

The deal was extended by nine months until March, bringing relief to the markets after a global supply glut had hammered prices since 2015.

Traders will now be looking to crude stockpile figures due later yesterday from the American Petroleum Institute to offer an updated indication of market demand.

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