Oil Price Rises slightly As Saudi Arabia Cuts Ties With Iran

The price of oil rose yesterday following supply risks from the Middle East after Saudi Arabia cut diplomatic ties with Iran.

At about 12.30 GMT yesterday, US crude climbed 30 cents to $37.34 a barrel while Brent crude also increased by 59 cents to stand at $37.87 a barrel.
Tensions between major crude producer, Iran, and its Sunni Arab neighbours reached new heights yesterday as the world’s biggest pumper of oil, Saudi Arabia, and Gulf allies cut or downgraded diplomatic ties with Tehran in a row over the execution of a Shiite cleric.
Angry exchanges following Saudi Arabia’s execution of prominent Shiite cleric and activist, Sheikh Nimr al-Nimr, last Saturday erupted into a full-blown diplomatic crisis as Riyadh and its ally Bahrain, severed their relations with Tehran.
Reacting to the development, market strategist at IG Markets in Singapore, Bernard Aw, observed that oil started the new year on the mend, as markets reacted to fears that geopolitical tensions in the Middle East may threaten the supply of oil.
Aw, however, added that despite the rise, the persistent global crude oversupply would continue to weigh on prices over the longer term.
“Unless we see a convincing drop in oil output from these two nations, and the broader oil-producing community, the supply glut issue will persist, which means oil prices would remain under pressure for a longer period,” he told AFP.
The Organisation of the Petroleum Exporting Countries (OPEC), whose 13 members include Saudi Arabia and Iran, decided against cutting output levels last month despite a plunge in oil prices, in a bid to maintain market share following competition from the US shale oil output.
Nigeria needs oil prices to rise higher than the present levels to be able to fund its budget which is benchmarked at $38 a barrel.