It turns out that thanks to a glut of crude, even tension between two, big oil-producing countries isn’t enough to drive prices higher.
Oil futures spiked briefly on Monday after the news that Saudi Arabia would cut diplomatic ties with Iran, a development that could be seen as a threat to oil supplies.
Investors quickly discounted those fears, however. After rising by $1.35, the price of benchmark U.S. crude ended the day down 28 cents to $36.76 a barrel on the New York Mercantile Exchange. Brent crude, reflecting the price of international oils, dipped 6 cents to close at $37.22 a barrel in London.
While oil markets were see-sawing, stock markets sagged on evidence that the global economy might be weaker than expected this year. The Dow Jones industrial average lost 276 points, or 1.6 percent, and was down 468 points earlier in the day.
New reports indicated that manufacturing is continuing to struggle, with factory activity falling in December for the second straight month in the U.S. and the 10th straight month in China.
Slow growth means that the current oversupply of oil could be more stubborn than expected. Government figures show that the stockpile of U.S. crude oil grew by 2.6 million barrels during the week ended Dec. 25 and were 9.9 million barrels higher than a year ago.
Oil prices are likely to remain about where they are until either production drops or the world economy perks up and drives demand higher.
