United States oil falls after crude stocks hit record high

Oil has collapsed from levels above $100 a barrel seen in mid-2014 due to excess supply, in a slide that deepened after the Organization of the Petroleum Exporting Countries later that year dropped its policy of cutting supply to boost prices. Last month, Europe and the United States announced they would lift sanctions against Tehran following an agreement on the country’s nuclear programme. Saudi Arabia’s regional rival Iran surprised markets by saying that it too supported the move, sending prices soaring.

However, in the first sign of OPEC and non-cartel producers working together since the rout began, Saudi Arabia and Russian Federation said Tuesday they would freeze output – if other major producers do the same.

The crude oil market now remains flooded with excessive supply, with neither of the parties able to establish a firm footing on future production targets.

China’s crude oil and liquids production is set to decrease at an average rate of 1.8 percent over the next two years as sustained weakness in oil prices prompt the country’s largest producers to reduce upstream spending and disengage from high-production, BMI said in a separate note on Friday. And if you know anything about Iran and Saudi Arabia’s relationship, you know this deal is already in doubt.

Iran appeared on Wednesday to back a plan laid out by four influential oil producers to cap their crude output if others do the same, though it offered no indication that it has any plans to follow suit itself.

The International Monetary Fund has cut its forecast for Saudi economic growth to just 1.2 percent in 2016, the lowest in seven years.

Standard & Poor’s, the rating agency, has cut Saudi Arabia’s credit rating again on Wednesday with the forecast of the nation’s current account deficit led by the plunging oil prices.

The only way for oil prices to rise from here is if world demand increases and we’re able to consume the oil surplus.

Riyadh has fiscal reserves of more than $600 billion. That’s why oil prices collapsed.

Mistrust and the battle for market share remain the most serious obstacles to a lasting and effective deal, according to analysts.

“Saudi Arabia simply does not trust Russian Federation or Iran because of political and economic rivalries”, he said.