Oil prices have fallen by around 2% as political tension between Saudi Arabia and Iran clouded the prospect of an agreement to cut output amid a global oversupply.

Global Brent crude benchmarks LCOc1 fell 67 cents and traded at $35.75 a barrel, while the US crude futures CLc1 slipped 46 cents at $35.51 per barrel, Reuters reported.

Protesters stormed the Saudi embassy in Tehran after Saudi Arabia executed a senior shia muslim cleric, with Saudi Arabia then ending its diplomatic relations with Iran.

"There are rising stockpiles and the tension between Iran and Saudi Arabia make any deal on production unlikely."

CMC Markets head of strategy Michael Hewson told the news agency: "There are rising stockpiles and the tension between Iran and Saudi Arabia make any deal on production unlikely."

Oil prices could be under pressure with the prospect of shale oil from US reaching market following the lifting of 40-year ban on crude export.

Oil futures have fallen drastically from above $115 in June 2014 with continuing oversupply.

Due to falling prices some producers increased output to prevent income falling rapidly and also to retain market share.

Oil exports from Iran are also expected to rise in 2016 as Western sanctions against the country may be lifted for its nuclear weapons programme, adding to supply glut.