The following is an excerpt from Chris Dieterich | January 4, 2016 | Barrons.com |
Tensions are flaring in the Middle East but oil prices are still falling on Monday.
The standoff pitting Saudi Arabia, the world’s largest oil producer, against Iran, a fellow OPEC member and rival for influence in the Middle East, escalated quickly over the weekend. The Kingdom, joined by Bahrain and the United Arab Emirates, downgraded their diplomatic ties with Iran on the heels of Iranian protests that resulted from the execution of a Shiite cleric.
Even so, West Texas Intermediate crude prices fell 1.1% to $36.65 a barrel in recent trading, while the United States Oil Fund (USO) dropped 0.8%. Brent crude oil, the global benchmark, fell 1% to $36.90 in recent trading after rising more than 4% earlier in the day. The United States Brent Oil ETF (BNO) is down 1%.
Regional turmoil in the Gulf tends to stoke concerns about supply and lift oil prices. Not on Monday. Oil prices did start Monday higher, but gains evaporated quickly as global stocks sold off. The trend adds more fodder to the argument that commodity prices are moving more closely in lockstep with stocks in recent months — not a trend that diversified investors hope to see.
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