Oil prices down on concerns of growth in China and a stronger USD

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Wednesday, Jan 06 2016

Crude oil tumbled almost a buck on Tuesday to trade at 35.86 as global overstock outweighed tensions in the Middle East as more and more nations side with Saudi Arabia and severe diplomatic ties with Iran. Brent oil matched WTI’s slide to trade at 36.32. Rising tensions in the Middle East typically trigger a knee-jerk increase in the price of oil. But these are not typical times for the oil market. With several factors already weighing on the price of oil, increasing frictions in this historically tumultuous region are poised to counter-intuitively exacerbate the negative outlook for oil.

Oil prices fell on Tuesday on concerns about the pace of economic growth in China and a stronger US dollar, handing back some of the gains triggered by an escalation of tensions in the Middle East. Kuwait recalled its ambassador to Iran after attacks on Saudi missions by Iranian protesters, state news agency KUNA reported.

Analysts said that as long as the conflict did not affect oil production in the region it would not have a consequence for oil prices. ANZ bank said the tensions between Saudi Arabia and Iran will "reduce the likelihood of any collaboration between the two oil majors regarding oil output as Iran re-enters the international market once sanctions are lifted"

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