Oil prices rose 3.5 per cent Monday
Oil prices dipped Tuesday after reaching highs not seen since July 2015 on Monday, mostly due to rising tensions between Saudi Arabia and Iran.
By 1:37 p.m. EST, Brent crude had fallen by 63 cents to $63.64/barrel and US WTI had slipped by 22 cents to $57.13/barrel. The Canadian Crude Index was up $3.32 to $42.84, a rise of 8.35 per cent.
According to Reuters, the Saudi-led coalition battling the Houthi movement in Yemen plans to close all Yemeni air, sea and land crossings after a missile was fired towards the Saudi capital city of Riyadh on the weekend.
In the past, Saudi Arabia and its Gulf allies have seen Iran as being responsible for the Yemen conflict. On Monday, Saudi Arabia’s Foreign Minister Adel al-Jubeir said the kingdom reserves the right to respond to Iran’s “hostile actions”.
“Saudi Arabia is really going all-in again against Iran and that is, for me, more the focus than the domestic issue,” Petromatrix strategist Olivier Jakob told Reuters.
“On the one hand, it increases the global geopolitical risk level, but it also increases the difficulty of keeping consensus within OPEC.”
The “domestic issue” Jakob referred to is the arrest of royals, ministers and investors over the weekend, ordered by Saudi Crown Prince Mohammed bin Salman. The arrests are described by one official as “phase one” of a crackdown on corruption.
On Nov. 30, OPEC will meet to discuss prolonging the supply cut pact that has seen participants drop their combined production by 1.8 million barrels per day (b/d). The pact is due to expire at the end of March 2018.
Currently, the cartel is hoping to include other countries in the agreement, according to OPEC Secretary-General Mohammad Barkindo. He did not mention the other countries approached.
Reuters reports Brazil has rejected an informal attempt by Saudi Arabia to join the OPEC-led production cuts.
In the United States, the Energy Information Administration forecasts the domestic crude production to rise more by 720,000 b/d to 9.95 million b/d in 2018. In its forecast for 2018 last month, the EIA expected a 680,000 b/d year-over-year increase to 9.92 million b/d.
Analysts are predicting data from the EIA released on Wednesday will show a decline in US crude stocks.
