Stocks Pummeled Worldwide By China, Saudi-Iran Tensions

The worldwide furor over Saudi Arabia’s execution of a Shi’ite cleric ended speculation that OPEC members might agree to production cuts to lift prices.

US Secretary of State John Kerry called his counterparts in each country in a bid to ease the tensions and the United Nations moved to shelter peace efforts in Syria and Yemen from the diplomatic storm.

Oil prices fell on Tuesday on concerns about the pace of economic growth in China and a stronger United States dollar, handing back some of the gains triggered by an escalation of tensions in the Middle East.

Prices have since eased because “the market is still focused on the over supply issue”, said UOB senior economist Alvin Liew.

It followed a short-lived rally early this week when mounting tensions between Saudi Arabia and Iran pushed oil up to $39.

Benchmark Brent futures were traded at $34.48 a barrel at 1606 GMT, down $1.94 on the day, and at their lowest level since early July 2004.

Elsewhere in the energy complex, natural gas for February fell 0.2% to $2.32 per million British thermal unit, while gasoline for the same month sank 3.6% to $1.21 a gallon. “Concerns about economic data have weighed on oil prices”.

“Judging from how oil supply and demand (situation) is not expected to improve at least in the first half of 2016, it would suggest that oil prices would continue being bearish”, he said. He noted that futures were hit also by official data Wednesday revealing a 10.6 million-barrel increase in USA gasoline stocks – the biggest weekly rise since 1993.

Chinese stock markets extended declines on Tuesday after a 7-percent plunge the previous day caused trade to be suspended. The prices represent a 15 cent per barrel premium to the Argus Sour Crude Index (ASCI), which tracks the price movements of medium sour crude delivered at the US Gulf Coast of Mexico hub – the benchmark for the region, preferred by Aramco. But the latest figures released last night by the US Department of Energy showed production rising by 17,000 barrels a day over the past seven days, the fourth consecutive week of increases.

Global oil prices have crashed 70 percent since mid-2014 as near record output from major producers like the Organization of the Petroleum Exporting Countries (OPEC), Russia and North America create a ballooning overhang that has left storage tanks around the world struggling to cope with the excess oil.

The clash between Saudi Arabia and Iran comes as Tehran, which holds some of the largest proven reserves, hopes to ramp up oil exports once sanctions come off against Iran’s controversial nuclear programme.