Saudi Arabia halts $3B Lebanese arms deal amid Iran dispute

Oil prices have fallen but are expected to increase soon after four oil producers, including Russia, Saudi Arabia, Qatar, and Venezuela agreed to freeze output levels.

Meanwhile, data from the US Energy Information Administration on Thursday showed the country’s crude oil inventories rose by 2.1m barrels last week to a peak of 504.1m barrels.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in March CLH6, -0.84% traded at $30.54 a barrel, down $0.23 in the Globex electronic session.

US crude lost $1.13, also finishing 3.7 percent lower at $29.64.

OPEC rhetoric, plus some wild estimations by the American Petroleum Institute (API) about a dip in crude inventories despite plenty of predictions to the contrary, had contributed to a nice recovery start for oil, but it was to be short-lived.

Oil prices fell 4 percent on Friday, with Brent down a third straight week, as record high USA crude stockpiles intensified worries that a plan to freeze world output will do little or nothing to reduce massive oil supplies already in the market. Iran has endorsed the plan but without committing to an output cap.

“The freeze plan looked positive, but arguably the agreement has been undermined with both Russian and Saudi oil ministers saying afterwards that they do not plan an output cut”.

Hezbollah on Friday said the Saudi decision to halt aid had been taken a long time ago because of the kingdom’s spending on its military involvement in Yemen, and because of low oil prices.

Iran’s production last month remained well below historic levels, as sanctions had just been lifted over its nuclear program.

“The news has actually disappointed the market slightly because some people had hoped to see a cut rather than a production freeze” said City Index analyst Fawad Razaqzada.

A report from Bank of America Merrill Lynch Global Research team suggested that “the meltdown in oil and rates has wiped out US$3 trillion in energy and financial equity market value” in recent months.

An unlikely critic of the Saudi/Russian pact is an unnamed Iranian oil source, who told Reuters, “The problem in the oil market is the glut; there is a need to do something to bring down these extra barrels”.

Indeed, Wittner forecasts that the oil price will be closer to $50 by the end of the year.

Speaking in Saudi Arabia this week, Bob McNally, President of the Rapidan Group was hopeful that this agreement was the beginning of a market rebalancing and said that there’s an “awareness coming that shale can’t replace OPEC”, and welcomed this move.