Oil resumes slide on worries Middle East rift could sap drive to cut output

Oil prices on Tuesday resumed their slide from the previous session, hit by concerns that a political rift between Qatar and several Arab states would undermine an OPEC-led push to tighten the market.

Persistent gains in U.S. production also dragged on benchmark crude prices, traders said.

Brent crude futures LCOc1 were trading at $49.15 per barrel at 0119 GMT, down 32 cents, or 0.65 percent from their last close. That was more than 8 percent below May 25, when an OPEC-led policy to cut oil output was extended into the first quarter of 2018.

U.S. West Texas Intermediate (WTI) crude futures CLc1 had dropped 32 cents, or 0.7 percent, to $47.08 per barrel. That was down over 7.5 percent from May 25.

The Arab world's biggest powers cut ties with Qatar on Monday, accusing it of support for Islamist militants and Iran.

Steps taken include closing down transport links with Qatar and preventing ships coming from or going to the small peninsular nation. That includes the port and docking area of Fujairah, in the United Arab Emirates, used by Qatari oil and liquefied natural gas (LNG) tankers to take on new shipping fuel.

With production capacity of about 600,000 barrels per day (bpd), Qatar's crude output ranks as one of the smallest among the Organization of the Petroleum Exporting Countries, but tension within the cartel could weaken the supply deal aimed at supporting prices.

"A potential risk to monitor might be that Qatar will view this as being provided with less encouragement to comply with the agreed production quota," said Jameel Ahmad of futures brokerage FXTM.

Although Qatar is a relatively small oil producer, other OPEC states could see such an action as a reason to stop restraining their own output, traders said.

Worries over the outlook for OPEC's drive to rein in production come amid bulging supplies from elsewhere, especially the United States.

U.S. crude production has jumped over 10 percent since mid-2016 to 9.34 million barrels per day (bpd) C-OUT-T-EIA, levels close to top producers Russia and Saudi Arabia.

"The relentless increase in U.S. oil production appears to have the market worried that the OPEC cuts will be completely nullified by the increased U.S. production," William O'Loughlin, analyst at Australia's Rivkin Securities, wrote in a note to clients on Tuesday.