Falling U.S. stockpiles are also a source of market optimism.
A respite from the continuing crude price plummet was achieved Tuesday, with West Texas Intermediate settling up 79 cents at $48.19 and Brent rising 59 cents to $50.06 per barrel - a welcome development compared to Monday's losses that were triggered by worry over the spat between Qatar and other Arab states.
In fact, while Saudi Arabia and other Arab states cutting ties with Qatar because they believe it is aiding terrorists and Iran, was the focus of heated political debate earlier this week, Firas Abi Ali, analyst for IHS Markit Middle East, wrote in a report that Qatar "will eventually have no choice but to accept a junior role in the U.S.-Saudi alliance" and that if "Qatari behavior does not change, a coup against the emir would be more likely" - which is why few experts believe the dispute will be a long one, despite Saudi Arabia port authorities declaring that no vessels will be allowed coming from or going to Qatar, regardless of flag or owner nationality.
James Brilliant, co-chief investment officer at Century Management, also noted that Qatar is only the number 17 crude producer in the world: "They're a relatively small producer," so isolating it "won't be a disruption."
James Brilliant, Century Management
They're a relatively small producer [so isolating it] won't be a disruption
This is the consensus of a brief issued by Maersk Oil: the unit of A.P. Moller-Maersk stated that while it is monitoring the situation closely, the Qatar diplomatic spat has not impacted oil production or related operations in that country (Maersk Oil is reported to produce about 300,000 barrels per day of Al-Shaheen crude in Qatar).
Crude prices on Tuesday may also have been buoyed by a Bloomberg survey showing that U.S. crude inventories probably declined by 3.25 million barrels last week; also, contango, whereby the near-term contract trades at a discount to those for expiration later, narrowed between the July and August WTI crude contracts, thus contributing to bullish sentiment.
Tariq Zahir, a commodity fund manager at Tyche Capital Advisors, remarked, "I wouldn't be surprised if we saw the front spread get even a little bit stronger; that would definitely give a bid to crude prices."
On Monday, analysts dismissed the initial wave of fear over Qatar influencing prices; they pointed out that the prospect of the Organization of the Petroleum Exporting Countries' highly-publicized cutback extension doing nothing to improve swollen stockpiles is the real cause of trader disenchantment.