The diplomatic dispute with Qatar and the rising U.S. production are putting pressure on oil prices, slipped further below $50 a barrel.
Oil prices slipped further below $50 a barrel on concerns that a diplomatic rift between Qatar and several Arab states including Saudi Arabia could undermine efforts by OPEC to tighten the market.
Leading Arab powers including Saudi Arabia, Egypt and the United Arab Emirates cut ties with Qatar on Monday, accusing it of support for Islamist militants and Iran.
With oil production of about 620,000 barrels per day (bpd), Qatar is one of the smallest crude producers in the Organization of the Petroleum Exporting Countries, but some investors fear tension within the cartel could weaken its agreement to hold back production.
“The OPEC agreement stands and is highly unlikely to change because of tension with Qatar. Crude production in the Middle East will not change because of Qatar,” said Oystein Berentsen, managing director for oil trading company Strong Petroleum.
Rising U.S. production is also putting pressure on oil. The market is worried that the OPEC cuts will be completely nullified by the increased U.S. production.