The beginning of 2016 saw a surge in oil prices, as the relationship between major oil players Iran and Saudi Arabia deteriorated.
The strain in relations between the top crude oil producers caused concerns about possible disruptions to the oil supply.
Saudi Arabia, which is the biggest oil exporter in the world, severed diplomatic ties with Iran on Sunday, January 3, in response to the country’s storming of its embassy in Tehran.
The Brent global oil benchmark climbed by over one dollar to a recent high of $38.50 (£26.07) per barrel yesterday, January 4, before slipping back to $38.18 (£25.85) shortly before 6:00 am GMT that morning, although this still represented an increase of over 2%. Meanwhile, U.S. crude’s West Texas Intermediate saw rises of 77 cents (52 pence), which represents an increase of 2.08%.
Speaking about the issue, brokerage Phillip Futures said:
“With increased geopolitical tensions between Saudi Arabia and Iran, the market has put a premium on prices just when markets opened (in 2016).”
This latest clash between the Saudi Arabia and Iran comes as the latter nation, the holder of some of the biggest proven reserves, plans to increase oil exports after the removal of sanctions against it, due to its reaching a deal over its alleged nuclear weapons programme.
The increase in oil prices will be good news for companies like Royal Dutch Shell, which manufactures oil products like Shell Tellus S2 M 32 and Shell Gadus S2 V100 3.