Oil prices jump following Qatar diplomatic scandal
By Sara Israfilbayova
The price of oil rose in Asia trade on June 5 after Saudi Arabia led a group of four Arab states to cut off diplomatic ties with the State of Qatar.
The price for August futures of Brent crude oil increased by
0.98 percent to $50.44 per barrel, the price for July futures of
West Texas Intermediate (WTI) jumped by 1.01 percent and stood at
$48.14 per barrel.
Saudi Arabia, the United Arab Emirates (UAE), Bahrain and Egypt
said they would sever diplomatic ties with Qatar. Saudi Arabia said
it was severing ties with Qatar for the “protection of national
security from the dangers of terrorism and extremism.”
Last month, Qatar's state-controlled news agency posted comments purportedly from its emir that praised Iran and called Hamas the legitimate representative of the Palestinian people. Qatar said its state news agency had been hacked, but Saudi Arabia, the UAE, Bahrain and Egypt nevertheless blocked the websites of several Qatari news outlets.
Still, market participants will be watching to see if Qatar, a member of the Organization of the Petroleum Exporting Countries (OPEC), decides to disrupt the production cutback deal.
"This means Qatar may have little reason to keep the production quota and if that happens, it might encourage other OPEC members to cheat too," said Phin Ziebell, the Senior Analyst of National Australia Bank.
Another factor affecting the oil prices is the statistics released by the US Baker Hughes company. The number of drilling rigs in the U.S. has increased by 0.88 percent to 916 over the working week ending June 2, according to the date of Baker Hughes.
In annual terms, the number of drilling rigs increased by 508 units, or more than 2.25 times.
U.S. crude production has averaged more than 9.3 million barrels a day for four straight weeks. The government now expects production to reach nearly 10 million barrels a day next year.
President Donald Trump's decision to withdraw from the 2015 Paris Climate Agreement on Thursday sparked additional concerns that the U.S. oil production could expand rapidly in the absence of a stringent focus on curbing the use of fossil fuels.
The increase in U.S. drilling activity and shale production has mostly offset efforts by OPEC and other producers to cut output in a move to prop up the market.
OPEC and some non-OPEC producers extended a deal to cut 1.8 million barrels per day in supply until March 2018 in Vienna on May 25.
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