Oil fell, erasing an earlier gain, as a global glut outweighed an increase in tension between Saudi Arabia and Iran.

The Saudi government cut ties with Iran following an attack on its embassy in Tehran by demonstrators protesting the execution of a prominent Shiite cleric. Prices last week capped the biggest two-year loss on record amid speculation a global glut will be prolonged as U.S. crude stockpiles expanded and the Organization of Petroleum Exporting Countries abandoned output limits.

The Middle East accounted for about 30 percent of global oil output in 2014, according to the U.S. Energy Information Administration. Iran and Saudi Arabia sit on either side of the Persian Gulf, the site of the world’s biggest concentration of oil tankers.

West Texas Intermediate for February delivery fell 26 cents, or 0.7 percent, to $36.78 a barrel at 1:52 p.m. on the New York Mercantile Exchange. Brent for February settlement slipped 9 cents to $37.19 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of 41 cents to WTI.

Crude inventories at Cushing, Oklahoma, the delivery point for WTI futures, rose to 63 million barrels in the week ended Dec. 25, a record high, according to the Energy Information Administration. Domestic production climbed for a third week to 9.2 million barrels a day.

Source: Bloomberg