Oil prices swung rapidly on Monday, first rising on tension between Saudi Arabiaand Iran before fears about the strength of the global economy drove prices lower.
Brent crude oil futures rose 3.3% to $38.50 (£26.17) a barrel at one stage, the global benchmark’s highest price for about three weeks, after Saudi Arabia executed a prominent Shia Muslim cleric.
However, the weak economic data coming out of China triggered fears about a downturn in economic growth, and sentiment about the world economy was knocked further by figures coming out of the US.
By the end of the day in London, Brent was down 13 cents at $37.14.
Late last month, the price hit its lowest level for 11 years, touching $36.05 a barrel. Then the concern was about the impact on supply from the lifting of sanctions on Iran which could push down prices further.
The tensions between Saudi Arabia and Iran was also sparking questions about the implications for oil production.
Some analysts were suggesting the Iranians might export more oil once sanctions are lifted, adding to the world’s oversupply of the commodity. But, others said Saudi output in its eastern province could be jeopardised by unrest in the region, which could knock its output.
Ric Spooner, an analyst at CMC Markets in Sydney, said there was no imminent threat to oil production but that the dispute was a cause for concern. “It may be seen by the market as an incremental step in a possible longer-term escalation of problems in the core oil producing nations of Saudi Arabia and Iran,” he told Bloomberg News.
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