REUTERS
Oil gained for a second day as Saudi Arabia cut ties with Iran a day after its embassy in Tehran was attacked to protest the Saudis' execution of a prominent Shiite cleric, Bloomberg reported.
Brent for February settlement increased as much as $1.22, or 3.3%, to $38.50 a barrel on the London-based ICE Futures Europe exchange,according to Bloomberg.
Prices slid 35% last year for a third annual drop. The European benchmark crude was at a premium of 32 cents to WTI.
"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," Ric Spooner, a chief analyst at CMC Markets in Sydney, told Bloomberg by phone.
"It's likely to lead to some short covering and a bit of risk premium being built into pricing. There's no immediate threat to production."
Saudi Arabia and Iran, respectively OPEC's first- and fifth-ranked producers, are on opposite sides of Middle East conflicts from Syria to Yemen. Prices last week capped the biggest two-year loss on record amid speculation a global glut will be prolonged as U.S. crude stockpiles expanded and the OPEC abandoned output limits, according to the report.
As reported earlier, Saudi Arabia, the world's biggest oil exporter, cut diplomatic ties with Iran on Sunday in response to the storming of its embassy in Tehran. The diplomatic row between the two major oil producers escalated following Riyadh's execution of a prominent Shi'ite cleric on Saturday.