Analyst: Gulf rift may undermine oil output cut deal, prices

BAKU, Jun 6 (PRIME) -- Tensions between Qatar and the Arab world’s biggest powers is able to crash global crude prices by undermining an oil output cut agreement between OPEC and non-OPEC states, an economist, head of the Center for Economic and Social Development Vugar Bairamov told PRIME on Tuesday.

“The Qatar situation has already hurt the global crude market. Despite many expectations, we can see a price fall. Tensions inside OPEC are one of the reason. The risk that (the situation) can put an end to an oil production cut agreement and prevent the deal from fulfillment is really high,” the expert said.

He added that the dispute has split OPEC into two opposite groups.

“And it, in its turn, will create an obstacle for monitoring the implementation of the OPEC+ oil output reduction deal… The supply may remain stable, but there are a number of psychological factors, which will influence the market in some way. If Qatar’s oil export is not reduced, we will see a sharp dive of oil prices in the short-term,” Bairamov said.

On Monday, Qatar was accused by Bahrain, Saudi Arabia, Egypt and the United Arab Emirates (UAE) of backing terrorist organizations and disrupting the countries’ national security. They severed diplomatic relations with the country and shut down transport links.

OPEC states agreed to reduce their oil production by 1.2 million barrels daily to 32.5 million barrels in November 2016. Russia joined the agreement in December with a promise to cut output by 300,000 barrels daily compared with the level of October 2016. The agreement was concluded for January–June and was prolonged for nine more months in May.

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