Is the oil correction done? – BBH

By FXStreet Analysts at Brown Brothers Harriman explained that the price of oil is seeing its biggest decline today since February 23.

Key Quotes:

“The ostensible reason is that Iran once again reiterated it would only consider capping its output after it reached four million barrels a day, its pre-sanction output.

Last month, the Saudis and Russia (joined by Venezuela and Qatar) indicated they were prepared to freeze output on the condition that the Iranians (and others would join). It was clear that the Iranians could not and would not join. Iran had just abandoned its nuclear ambitions to have sanctions lifted. If it prematurely froze its oil output, it would have ended its nuclear program for nothing.

We must assume that the Saudis realized that Iran would not participate. Nevertheless, the Saudi offer to freeze was valuable tactically. First, it deflected some of the blame for low oil prices away from itself and toward its rival. Second, the offer to freeze output was also a ploy to force an issue that showed a conflict of interest between Iran and its ally Russia. Third, Saudi Arabia (and Russia) prepared to freeze output …read more

Source:: FX Street