Why Are Oil Prices Tanking 2 Weeks Before A Potential Global Production Freeze Agreement?

Oil investors had high hopes for this month’s international meeting of leading OPEC and non-OPEC oil producers, who will reportedly be discussing a plan to freeze global oil production. Rumors surrounding the meeting have been driving a huge rally in crude oil prices after they hit their lowest point in more than 10 years in early 2016.

However, in a new interview, Saudi Arabian Deputy Crown Prince Mohammed bin Salman said that there’s still a major hurdle standing in the way of a production freeze agreement: Iran.

When asked if any global production freeze would need to include Iran for Saudi Arabia to participate in the deal, he said Iran would definitely need to be included.

“Without a doubt. If all countries including Iran, Russia, Venezuela, OPEC countries and all main producers decide to freeze production, we will be among them,” Salman explained.

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While Iran’s oil minister will be attending the April 17 oil meeting in Doha, he has been adamant that Iran will not agree to a production freeze.

Shares of the United States Oil Fund LP USO are down 6.5 percent this week as investors seem to be realizing that a global production freeze deal could be far less likely than it seemed just weeks ago.

Disclosure: the author holds no position in the stocks mentioned.