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Oil Slips As Glut Worries Eclipse Saudi-Iran Tensions

Oil Slips As Glut Worries Eclipse Saudi-Iran Tensions
AFP/File / Frederic J. Brown US benchmark West Texas Intermediate for delivery in February fell 28 cents to $36.76 a barrel on the New York

New York (AFP) – Oil prices fell Monday as worries about oversupply and weak economic data from China eclipsed escalating tensions between major oil producers Saudi Arabia and Iran.

US benchmark West Texas Intermediate for delivery in February fell 28 cents to $36.76 a barrel on the New York.

Brent North Sea crude for February, the global benchmark for oil, slipped six cents to $37.22 a barrel in London.

“Petroleum markets drew some initial support on the rising tensions between Saudi Arabia and Iran after Saudi Arabia executed a prominent Shiite cleric Saturday on a terrorism charge, triggering protests, and then a severing of diplomatic ties,” said Tim Evans of Citi Futures.

“The immediate worry here is that the simmering longer-term tensions here could boil over into a more direct military confrontation that would put oil production and shipments from the region at risk,” he said.

But early price gains fizzled as traders returned to focus on the prolonged global supply glut and another weak report on manufacturing in China, the world’s largest energy consumer.

The standoff between Saudi Arabia and Iran poses “no real risk of any oil disruptions at this point and time,” said Again Capital founding partner John Kilduff.

“The overall glut is just an immovable force at this point and time and nothing short of actual war will stop that,” he added.

Citi’s Evans pointed out that the Saudi-Iran tensions also made it “somewhat more difficult” for the 13-member OPEC cartel to reach any agreement that could limit supplies.

OPEC decided last month against cutting output levels to shore up crude prices, instead choosing to maintain market share faced with competition from North American shale oil output.

Kilduff said that poor Chinese manufacturing data weighed on sentiment. Factory activity fell to its weakest level in a quarter of a century in December, the 10th straight month of sector contraction.