Oil seesaws after Qatar shunned by Arab neighbors over alleged terrorism links
During early trading, Brent crude jumped 32 cents to above $50 per barrel, while US West Texas Intermediate (WTI) saw a 34 cent increase to $48 per barrel.
By 2:00pm GMT prices slipped one percent, with Brent falling to $49.49 and WTI to $47.25 per barrel.
Qatar is the biggest supplier of liquefied natural gas (LNG). It also is a major exporter of condensate, a low-density liquid fuel and refining product derived from natural gas. The country also produces 1.48 million barrels of oil per day and is a member of the Organization of the Petroleum Exporting Countries (OPEC).
"I think it's still going to be a bit of a debate on the true impact it can have on the oil market," said Olivier Jakob, strategist at Petromatrix, as quoted by Reuters.
"In terms of oil flows it doesn't change very much, but there is a wider geopolitical impact one needs to consider," Jakob added. He explained that the deterioration in relations between OPEC members Qatar and Saudi Arabia could disrupt the cartel-led agreement on production cuts.
Saudi Arabia and UAE are OPEC's major crude exporters, with a much more significant impact on global oil prices.
Brent futures are still down seven percent since May 25, when OPEC, Russia, and other countries announced they would extend production cuts by another nine months into 2018.
Crude output in the United States, which is not a participant in the deal, has grown over 10 percent since last year to 9.34 million barrels per day, approaching the levels of top producers Saudi Arabia and Russia.
"Investors continue to doubt the ability of OPEC to rebalance the oil market, with crude oil prices remaining under pressure amid further signs of rising US oil production," said ANZ Bank.