(Corrects year in paragraph 5 to 2015)
By Henning Gloystein
SINGAPORE, Jan 4 (Reuters) - Oil prices jumped over 2
percent in the first trading hours of 2016 as relations between
Middle Eastern rivals Saudi Arabia and Iran deteriorated
following Riyadh's execution of a prominent Shi'ite Muslim
cleric.
Saudi Arabia cut diplomatic ties with Iran on Sunday,
responding to the storming of its embassy in Tehran in an
escalating row between the two major oil producers over Riyadh's
execution of cleric Nimr al-Nimr.
Global oil benchmark Brent LCOc1 climbed over 2.5 percent
and more than a dollar to a morning high of $38.50 per barrel on
Monday, before easing back to $38.28 at 0136 GMT - still up $1.
U.S. crude's West Texas Intermediate (WTI) futures CLc1 were
up 76 cents, or 2.05 percent, at $37.80 a barrel.
Despite this jump, oil prices are down by two-thirds since
mid-2014 on ballooning oversupply as producers pump between 0.5
and 2 million barrels of oil every day in excess of demand.
"It's bizarre. We left 2015 on a low, but everybody knew
that geopolitics can be one of the biggest price drivers in oil.
And now we're back in the office to a new year, political risk
is right back into the market," said an oil trader.
Iranian protesters stormed the Saudi embassy in Tehran early
on Sunday and Shi'ite Iran's top leader, Ayatollah Ali Khamenei,
predicted "divine vengeance" for the execution of Sheikh Nimr
al-Nimr, an outspoken opponent of the ruling Al Saudi family.
Saudi Arabia is the world's biggest oil exporter while Iran,
which has some of the biggest proven reserves, hopes to ramp up
exports following an expected lifting of sanctions against it
after reaching a deal over its alleged nuclear weapons
development programme.
"We are on track to see the implementation of the Iran deal
move forward," said deputy national security adviser Ben Rhodes
in Hawaii, where U.S. President Barack Obama is on vacation.
Iran's oil exports fell to around 1 million barrels per day
(bpd), down from a peak of almost 3 million bpd in 2011, before
the sanctions were put in place.
Iran plans to raise oil output by half a million to 1
million bpd post sanctions, although Iranian officials said over
the weekend they did not plan to flood the market with its crude
if there was no demand for it.
Hurt by falling prices, some OPEC-producers like Venezuela
are calling for coordinated action to cut output, but the
group's biggest producers in the Middle East have so far shown
no will to cut without a simultaneous reduction by other major
producers like Russia.
Oil output in Russia, one of the world's three biggest
producers next to Saudi Arabia and the United States, hit a
post-Soviet high in 2015 averaging 10.73 million bpd, up from
10.58 in 2014.
(Editing by Joseph Radford)
By Henning Gloystein
SINGAPORE, Jan 4 (Reuters) - Oil prices jumped over 2
percent in the first trading hours of 2016 as relations between
Middle Eastern rivals Saudi Arabia and Iran deteriorated
following Riyadh's execution of a prominent Shi'ite Muslim
cleric.
Saudi Arabia cut diplomatic ties with Iran on Sunday,
responding to the storming of its embassy in Tehran in an
escalating row between the two major oil producers over Riyadh's
execution of cleric Nimr al-Nimr.
Global oil benchmark Brent LCOc1 climbed over 2.5 percent
and more than a dollar to a morning high of $38.50 per barrel on
Monday, before easing back to $38.28 at 0136 GMT - still up $1.
U.S. crude's West Texas Intermediate (WTI) futures CLc1 were
up 76 cents, or 2.05 percent, at $37.80 a barrel.
Despite this jump, oil prices are down by two-thirds since
mid-2014 on ballooning oversupply as producers pump between 0.5
and 2 million barrels of oil every day in excess of demand.
"It's bizarre. We left 2015 on a low, but everybody knew
that geopolitics can be one of the biggest price drivers in oil.
And now we're back in the office to a new year, political risk
is right back into the market," said an oil trader.
Iranian protesters stormed the Saudi embassy in Tehran early
on Sunday and Shi'ite Iran's top leader, Ayatollah Ali Khamenei,
predicted "divine vengeance" for the execution of Sheikh Nimr
al-Nimr, an outspoken opponent of the ruling Al Saudi family.
Saudi Arabia is the world's biggest oil exporter while Iran,
which has some of the biggest proven reserves, hopes to ramp up
exports following an expected lifting of sanctions against it
after reaching a deal over its alleged nuclear weapons
development programme.
"We are on track to see the implementation of the Iran deal
move forward," said deputy national security adviser Ben Rhodes
in Hawaii, where U.S. President Barack Obama is on vacation.
Iran's oil exports fell to around 1 million barrels per day
(bpd), down from a peak of almost 3 million bpd in 2011, before
the sanctions were put in place.
Iran plans to raise oil output by half a million to 1
million bpd post sanctions, although Iranian officials said over
the weekend they did not plan to flood the market with its crude
if there was no demand for it.
Hurt by falling prices, some OPEC-producers like Venezuela
are calling for coordinated action to cut output, but the
group's biggest producers in the Middle East have so far shown
no will to cut without a simultaneous reduction by other major
producers like Russia.
Oil output in Russia, one of the world's three biggest
producers next to Saudi Arabia and the United States, hit a
post-Soviet high in 2015 averaging 10.73 million bpd, up from
10.58 in 2014.
(Editing by Joseph Radford)