Saudi actions drove prices down last year, and they could well be driving them up in 2016.
Brent crude rose briefly by as much as 4.6 per cent on Monday, after news that Saudi Arabia had executed 47 prisoners including an influential Shia cleric on the weekend, raising tensions across the region. Protestors in Shia powerhouse Iran stormed the Saudi embassy in Tehran, with Riyadh and its allies Bahrain and Sudan retaliating by expelling Iranian diplomats.
But after a brief surge, oil prices fell as poor economic news from China trumped tensions in the Middle East. Tank farms in the Cushing, Okla. refining hub running out of capacity also weighed on oil prices.
West Texas Intermediate for February delivery fell US26 cents, or 0.7 per cent, to US$36.78 a barrel at 1:52 p.m. on the New York Mercantile Exchange. Brent for February settlement slipped US9 cents to US$37.19 a barrel on the London-based ICE Futures Europe exchange.
“Given that oil is down at the moment with the news out of Middle East, what would take oil to move materially to US$50 would be some supply outage coming out of this story, or a military conflict between Iranians and Saudis,” said Helima Croft, global head of commodity strategy at RBC Capital Markets.
“Never say never,” although that is not RBC’s base case, Croft said. Ian Bremmer, president of risk management consultancy Eurasia Group, said he was surprised at the modest lift in prices on the latest Middle East episode.
For the rest of this article, click here: http://business.financialpost.com/news/energy/what-rising-geopolitical-risks-between-saudia-arabia-and-iran-may-mean-for-the-oil-glut?__lsa=b13f-7ce4