June 7 (UPI) -- Crude oil prices remained under pressure in Wednesday trading as geopolitical issues in the Persian Gulf lead to questions about OPEC unity.
Lines in the sand emerged at the start of the week when Saudi Arabia led a coalition of Persian Gulf allies in severing ties with Qatar over allegations of support for terrorist groups like the Sunni militants aligned with the group calling itself the Islamic State. The Islamic State took credit Wednesday for attacks in the capital of Iran, a predominately Shiite nation, which left at least three people dead.
The tensions would normally add a risk premium the price of oil given that several of the nations involved in the row are members of the Organization of Petroleum Exporting Countries and the Persian Gulf is a choke point for oil exports from the region.
Ole Hanson, the head of commodity strategy at SaxoBank, told UPI in response to email questions the flare-up in the region has had a negative impact on crude oil prices.
"Instead the focus has been on the potentially negative impact of the current deal to curb production falling apart," he said.
Iran is the only OPEC member with room for growth under a current deal to stem production in an effort to balance the market. Meanwhile, in an interim report on activities during the first half of the year, Dutch commodity trader Trafigura described the market situation as one of "chronic oversupply."
The price for Brent crude oil was down 1 percent about 15 minutes before the start of trading in New York to $49.64 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was down in parallel to $47.71 per barrel.
The sentiment on supplies came despite a report late Tuesday from the American Petroleum Institute that crude oil inventories in the United States, the world's leading economy, fell by 4.6 million barrels, compared with a forecast of 3.5 million barrels.
Traders, however, have focused on petroleum products like gasoline, rather than crude oil, to gauge market conditions -- and API reported gasoline stocks increased by 4.1 million barrels.
The U.S. Energy Information Administration releases official figures midway through the morning session and the results may offset some of the geopolitical factors at play in early trading.