Oil prices rose in Asia on Monday after crude kingpin Saudi
Arabia cut diplomatic ties with Iran following a row over Tehran’s execution of
a Shiite cleric. Saudi Arabia announced the decision on Sunday, a day after
protesters ransacked its embassy in Tehran over the execution of a Shiite
cleric.
Saudi Foreign Minister Adel al-Jubeir said Iranian diplomats
had 48 hours to leave the kingdom and Iran’s supreme leader said Saudi Arabia
would face “quick consequences” for executing the cleric. Fearing further
upheaval in the already volatile Middle East, the United States has urged
regional leaders to take measures to soothe tensions.
At around 0230 GMT, US benchmark West Texas Intermediate for
delivery in February was up 48 cents, or 1.30 percent, at USD 37.52 and Brent
crude for February was trading 61 cents, or 1.64 percent, higher at USD 37.89.
“Oil started the new year on the mend, as Asian markets reacted to fears that
geopolitical tensions in the Middle East may threaten the supply of oil,” said
Bernard Aw, market strategist at IG Markets in Singapore.
Despite the rise, Aw said however that the persistent global
crude oversupply will continue to weigh down 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
reporters.
Saudi Arabia is the biggest producer in the Organization of
the Petroleum Exporting Countries, which last month decided against cutting
output levels despite a plunge in oil prices. Iran is also a key OPEC member.
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