Oil eases but Saudi tensions keep 2-1/2 year highs in sight

Oil prices largely held on to their gains after posting the biggest rise in six weeks following the Saudi moves.

Brent crude futures were at peak of 64.65 dollars a barrel and U.S. crude steadied at 57.24 dollars in Europe after going as high as 57.69 dollars .

Saudi Crown Prince Mohammed bin Salman moved to shore up his power base with the arrest of royals, ministers and investors, which an official described as part of “phase one” of the crackdown.

More tellingly, tensions escalated between OPEC members Saudi Arabia and Iran and it was this, more than the purge, that rattled the oil market, analysts said.

The Organisation of Petroleum Exporting Countries, led by Saudi Arabia, has agreed to restrain crude output by 1.8 million barrels-per-day together with 10 other nations including Russia until March 2018.

OPEC meets later this month and has been widely expected to extend the deal.

The Saudi-led-coalition fighting against the Houthi-movement in Yemen said on Monday it was closing all Yemeni air, sea and land-crossings after a missile was fired towards Riyadh at the weekend.

Saudi Arabia and its Gulf allies have said they see Iran as responsible for the Yemen conflict.

On Monday, Saudi Foreign Minister Adel al-Jubeir said his country reserves the right to respond to Iran’s “hostile actions”.

“The combined oil production of these two OPEC nations is close to 14 million bpd.

“When they stare at each other from very close proximity it is not surprising to see oil prices rally,” PVM Oil Associates Tamas Varga said.

Even a distant threat of disruption to Middle East crude supplies from any conflict is likely to support the price.

“What’s happening in Saudi Arabia does not change the strategic energy priorities of the Saudis and the market is likely to dismiss this noise,” UBS said in a note.