Crude-oil futures were down in Asia trade Tuesday, as investors shifted their focus back on a supply glut as U.S. producers continue to expand their oil digging operations despite softening prices.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in July traded at $47.04 a barrel at 0307 GMT, down $0.36 in the Globex electronic session. August Brent crude on London's ICE Futures exchange fell $0.40 to $49.07 a barrel.
On Monday, global oil markets saw major swings, with prices first spiking nearly 2% when Saudi Arabia and three other Persian Gulf states severed diplomatic ties with Qatar, a member of the Organization of the Petroleum Exporting Countries. Saudi Arabia and others have long accused Qatar of mingling with the terrorist movement in Iran, an allegation that Qatar has denied.
But the rally lost steam and prices later sank to a one-month low amid profit-taking pressure.
"Political disputes between OPEC members are nothing new, but history has shown that shared economic interests to keep supply discipline has trumped other interests," said Vivek Dhar, a commodities strategist at the Commonwealth Bank of Australia.
The cartel and Russia last month agreed to extend a deal to cut their collective production by 1.8 million barrels a day. Qatar, though a OPEC nation, is considered a minor crude producer.
Even if Qatar ends up dropping out of the deal, it is unlikely that other producers will follow suit because "Qatar doesn't have the weight to cause that," said Mr. Dhar.
However, the inability of crude prices to stick with earlier gains underscores market concerns over the unrelenting glut and the strong production out of the U.S.
Latest data show that U.S. oil producers activated more oil rigs in the week ended June 2. The latest addition of 11 rigs marks a 20 straight weekly increase.
"This means shale producers see prices under $50 to be still economical," said a Singapore-based crude trader.
Traders will be closely watching U.S. weekly oil data due Wednesday. Despite the increase in crude production, U.S. crude inventories have decreased for eight straight weeks.
Nymex reformulated gasoline blendstock for July -- the benchmark gasoline contract -- fell 112 points to $1.5269 a gallon, while July diesel traded at $1.4508, 85.00001 points lower. ICE gasoil for June changed hands at $430.75 a metric ton, unchanged from Monday's settlement.
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(END) Dow Jones Newswires
June 05, 2017 23:46 ET (03:46 GMT)