Oil erased earlier gains as a diplomatic clash involving OPEC members Saudi Arabia and Qatar was seen having limited impact on the group’s policy.
Futures slipped 0.3 percent in New York, erasing an earlier gain of 1.6 percent. 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. The nation still has access to shipping routes to deliver oil and gas to buyers around the world.
While the diplomatic spat hasn’t affected shipments, any further escalation could raise the prospect of supply disruptions from the Middle East, including Organization of Petroleum Exporting Countries members Saudi Arabia, Iran and Qatar. The nations all use the Strait of Hormuz, through which the U.S. Department of Energy estimates about 30 percent of seaborne oil trade passes. Crude had slipped below $50 a barrel amid concern that an extension of OPEC’s cuts won’t be enough to shrink global inventories as U.S. output expands.
“Given the persisting bearish sentiment in the oil market, the unprecedented move might not have a long-lasting impact on oil prices, but it is worth keeping in mind,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London.
West Texas Intermediate for July delivery slipped 47 cents to $47.19 a barrel on the New York Mercantile Exchange at about 7:45 a.m. Central time. Total volume traded was about 33 percent above the 100-day average. Prices lost 70 cents to close at $47.66 on Friday, capping a 4.3 percent decline for the week.
Brent for August settlement fell 24 cents to $49.71 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 $2.02 to August WTI.
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Drillers targeting crude in the U.S. 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.