Bruce Jefferson
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Bruce Jefferson in Commodities,

The Future of Oil is Uncertain as Saudi's Threaten to "Cripple" the Market

The highly-anticipated meeting of OPEC and non-OPEC global oil producers this weekend in Doha did very little to inspire confidence among oil investors that a timely solution to the massive crude oil glut is imminent. Although the purpose of the meeting was to discuss a potential global production freeze, Saudi Arabia and Iran could not agree over Iran’s participation in such a freeze.

Saudi Arabia demanded that Iran participate in any production freeze agreement. Iran, on the other hand, believes that it has every right to ramp crude production following the lifting of global sanctions against the country.

At one point during the meeting, Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman even threatened to flood the already crippled oil market with as much as 2 million barrels per day of additional crude oil if all the other meeting participants didn’t agree to the country’s terms for a freeze.

After rallying from as low as $26.05/bbl in February to as high as $43.69/bbl earlier this month, WTI crude prices are down only modestly in Monday’s session. News of the meeting’s unproductive results have the United States Oil Fund LP (ETF)  trading down 0.8 percent in early trading.

Oil prices may be getting propped up somewhat by news that a Kuwait oil workers strike has cut the country’s crude output in half.

The fate of the recent oil rally may now hinge on the outcome of the strike, as well as any indication of whether or not Saudi Arabia’s threat to sharply ramp production was simply a bluff.