By Christopher Johnson | LONDON
Oil prices slipped further below $50 a barrel on Tuesday on concerns that a diplomatic rift between Qatar and several Arab states including Saudi Arabia could undermine efforts by OPEC to tighten the market.
Kuwait Oil Minister Essam al-Marzouq said Qatar was committed to an OPEC agreement to restrict supply, telling Kuwaiti state news agency KUNA Doha was complying with its obligations.
“Qatar is … committed to the supply cut decision and its compliance ratio ranges between 93 and 102 percent,” he said.
But the many traders, confronted by surplus oil in many parts of the world, were still unnerved.
Greg McKenna, chief market strategist at futures brokerage AxiTrader, said there was “a real chance” OPEC solidarity surrounding its production cuts might fracture.
Benchmark Brent crude oil LCOc1 was 20 cents a barrel lower at $49.27 by 1350 GMT (9:50 a.m. ET), down around 8 percent from its level before OPEC and its non-OPEC allies said they were extending cuts until March 2018. The initial six-month deal to curb output had been due to run till the end of this month.
U.S. light crude CLc1 was down 20 cents at $47.20.
Leading Arab powers including Saudi Arabia, Egypt and the United Arab Emirates cut ties with Qatar on Monday, accusing it of support for Islamist militants and Iran.
Under measures taken, ships coming from or going to the small peninsular nation were barred from docking at Fujairah, in the UAE, which is used by Qatari oil and liquefied natural gas (LNG) tankers to take on new shipping fuel.
With oil production of about 620,000 barrels per day (bpd), Qatar is one of the smallest crude producers in the Organization of the Petroleum Exporting Countries, but some investors fear tension within the cartel could weaken its agreement to hold back production in order to prop up prices.
Several analysts said these fears were exaggerated.
“The OPEC agreement stands and is highly unlikely to change because of tension with Qatar. Crude production in the Middle East will not change because of Qatar,” said Oystein Berentsen, managing director for oil trading company Strong Petroleum.
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David Wech, managing director of Vienna-based consultancy JBC Energy, agreed: “We do not see too much cause for concern at this point regarding potential risk to the OPEC-led supply accord currently in effect.”
Rising U.S. production is also putting pressure on oil.
U.S. crude output has jumped more than 10 percent since mid-2016 to 9.34 million bpd, industry figures show. C-OUT-T-EIA
“The relentless increase in U.S. oil production appears to have the market worried that the OPEC cuts will be completely nullified by the increased U.S. production,” said William O’Loughlin, analyst at Rivkin Securities.
(Additional reporting by Henning Gloystein in Singapore; Editing by Dale Hudson and Edmund Blair)