Saudis Combine Politics and Oil Policy, Dismiss Oil Freeze Output

By Staff Writer | Apr 19, 2016 10:17 AM EDT

Saudi Arabia has decided to reject the freeze of oil output over the weekend without Iran's cooperation. This signal boosts the kingdom's willingness to combine oil policy and politics during pressures with Washington and Tehran.

Iran rejected to take part in the talks making Deputy Crown Prince Mohammed bin Salman reaffirmed during the meeting that Saudi Arabia will not do any deal if Iran would not participate, transmitting that both through the media and directly to a Saudi delegation being led by oil minister Ali al-Naimi, MSN reports.

"The signs of tensions within the kingdom and the willingness to politicize oil production, the mixed signals and flip-flopping really have an impact," said Antoine Halff, an oil economist and fellow at Columbia University's Center on Global Energy Policy.

Ali Al-Naimi separated oil policy from foreign policy for the past 20 years, asserting that pricing considerations including supple, demand and inventories were the key drivers of his decisions.  The technocratic method was developed on the experience of the 1973 oil embargo which hugely made a boomerang effect as it lead to weaker demand.

The transition only means everyone unprotected to energy prices, from oil majors like Exxon Mobil Corp. to traders such as Vitol Group BV, needs to mind the Middle East's opaque politics including the House of Saud. With Iran and Saudi Arabia weathering one of their badly diplomatic crises since the Islamic revolution way back in 1979 established a Shiite theocracy in Tehran, and the said countries favoring opposite sides in Yemen and Syria's civil wars, the oil market should prepare for a wild ride, according to a Bloomberg report.

Benchmark crude prices appropriately fell in early trading before some losses are recovered. The irony is that the anti-freeze delivers the oil market looking in debatable better shape, for those ready to wait, as reported by The Wall Street Journal.

The oil market can expect to increasing output from Iran, the retort of temporarily disrupted production in places like as Iraq and Nigeria including a possible boost to supply from wild cards such as Libya.

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