Oil market rocked by new Russia-Saudi Arabia deal
Saudi Arabia and Russia agree on oil co-operation that could limit supply.
The news has been spread around in a matter of seconds. Saudi Arabia and Russia together for an ‘historic’ oil market co-operation.
The core of the deal has been focused on the output’s limitation, with the aim to boost the oil prices sharply higher to tackle a global glut. In a joint-statement taken place during the the G-20 summit in China (last Monday), Russia and Saudi Arabia recognized the need to contain excess volatility in the market (source Telegraph). The two oil giants will thereby establish a working group to monitor the market and draft recommendations to keep oil prices steady and ensure solid investments in the industry. Crude oil futures rallied heavily in the build-up to the announcement and pared back slightly afterward. WTI futures for October remained over 3 percent higher on the day, however, at a little under $46 per barrel.
Russian Energy Minister Alexander Novak said that the countries are now discussing the details of a supply freeze deal ahead of an informal meeting of the Organization of Petroleum Exporting Countries (Opec), together with Russia, later this month in Algeria. “We are considering a production freeze as the most efficient tool, concrete parameters are being discussed at the moment,” he argued.
One of the other hot topic concerned the agreement between the two countries to exchange information and experience about new technologies in the oil and gas, and power generation sectors. Considering the several attempts to boost crude prices by freezing OPEC’s output have fallen in the past, the present deal seems to be presented as “historic moment” by the same Novak, particularly because Saudi Arabia has been wedded to keeping output high to hold market share.
In facts, Saudi Arabia is de facto leader of the oil cartel, but Russia is not a member.