Oil prices surged
during the start of 2016 trading as relations between top crude
producers Saudi Arabia and Iran deteriorated, raising concerns about
potential supply disruptions, though weak Asian manufacturing data kept a
lid on bullish expectations.
Saudi
Arabia, the world's biggest oil exporter, cut diplomatic ties with Iran
on Sunday in response to the storming of its embassy in Tehran. The
diplomatic row between the two major oil producers escalated following
Riyadh's execution of a prominent Shi'ite cleric on Saturday.
Global oil benchmark Brent LCOc1 climbed more than a dollar to a high of $38.50 per barrel on Monday, before easing back to $38.18 at 0556 GMT (12.56 a.m. ET), still up over 2 percent. U.S.
crude's West Texas Intermediate (WTI) futures CLc1 were up 77 cents, or 2.08 percent, at $37.81 a barrel.
The clash between the two Middle Eastern countries comes as Iran, which holds some of the largest proven reserves, hopes to ramp up oil exports following the expected removal of sanctions against it after reaching a deal on its alleged nuclear weapons development program.
Mainly Shi'ite Muslim Iran and Saudi Arabia's Sunni Muslim monarchy have clashed for years in the Middle East in political conflicts that have followed along sectarian lines.
Despite Monday's jump, oil prices are down by two-thirds since mid-2014 on oversupply as producers including the Organization of the Petroleum Exporting Countries (OPEC), Russia and the United States pump between 0.5 million and 2 million barrels of oil every day in excess of demand.
"OPEC, Russia and the U.S. beat our initial supply expectations, adding to an existing inventory headwind. For 2016 we think of it as the market rebalancing year, but only from 2H (the second half of 2016)," Alliance Bernstein said.
Alliance Bernstein said it expected average Brent prices to fall from $53 per barrel last year to $50 in 2016 but to recover to $70 a barrel in 2017 and to rise to $80 per barrel in 2018.
Global oil benchmark Brent LCOc1 climbed more than a dollar to a high of $38.50 per barrel on Monday, before easing back to $38.18 at 0556 GMT (12.56 a.m. ET), still up over 2 percent. U.S.
crude's West Texas Intermediate (WTI) futures CLc1 were up 77 cents, or 2.08 percent, at $37.81 a barrel.
The clash between the two Middle Eastern countries comes as Iran, which holds some of the largest proven reserves, hopes to ramp up oil exports following the expected removal of sanctions against it after reaching a deal on its alleged nuclear weapons development program.
Mainly Shi'ite Muslim Iran and Saudi Arabia's Sunni Muslim monarchy have clashed for years in the Middle East in political conflicts that have followed along sectarian lines.
Despite Monday's jump, oil prices are down by two-thirds since mid-2014 on oversupply as producers including the Organization of the Petroleum Exporting Countries (OPEC), Russia and the United States pump between 0.5 million and 2 million barrels of oil every day in excess of demand.
"OPEC, Russia and the U.S. beat our initial supply expectations, adding to an existing inventory headwind. For 2016 we think of it as the market rebalancing year, but only from 2H (the second half of 2016)," Alliance Bernstein said.
Alliance Bernstein said it expected average Brent prices to fall from $53 per barrel last year to $50 in 2016 but to recover to $70 a barrel in 2017 and to rise to $80 per barrel in 2018.
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