The price of oil hit an eleven-year low on Wednesday as tension between Saudi Arabia and Iran increased, leaving an agreement to cap output on oil increasingly unlikely.
Saudi Arabia cut diplomatic ties with Iran on Sunday after protesters ransacked the Saudi embassy in Tehran, protesting against Saudi’s execution of a senior Shia Muslim cleric. The United Arab Emirates (UAE) has also downgraded its diplomatic relations with Tehran.
Whilst increased tensions between Middle Eastern countries usually trigger an increase in the price of oil, in the current market the opposite has proved true. Oil prices have fallen even further than their recent rock bottom, wiping 8 percent off the price of oil in the last three trading days alone and making an agreement between OPEC members on a cap on oil output increasingly unlikely.
Both WTI Crude and Brent Crude are currently down 2.2 percent, at $35.97 and $36.42 respectively.