World crude oil markets took a bullish turn on September 5 as Russia and Saudi Arabia, two of the world’s largest producers, pledged to work together to bolster oil prices. The rally was short-lived, though, as it emerged that the statement signed by the two sides during the G-20 summit in China did not include any specific plans for joint action.
Prior to the official announcement on the signing, traders bid oil prices up in response to reports of a significant move towards co-operation between Moscow and Riyadh. However, hopes for an output freeze that might push prices up were quickly dashed.
Instead, Russian and Saudi officials hinted that the joint statement was more procedural in nature.
Russian Energy Minister Alexander Novak, for example, said that both sides had agreed that the most effective means on stabilising the market was to freeze production rates for perhaps three to six months. But he also indicated that this option was still under discussion and that no agreement had been reached on the length of the output restriction.
For his part, Saudi Energy Minster Khalid El-Falih said he saw no need to curtail production for the time being. Instead, the statement calls for more at least three more rounds of talks – negotiations later in September on the potential length of an output freeze, the establishment of a working group for oil and gas co-operation next month and discussions during the OPEC ministerial summit in November.
Some observers have remained optimistic, describing the joint statement as evidence that Moscow and Riyadh are moving towards concrete co-operation on oil price fluctuations. Others have argued, though, that the parties are not ready to go beyond symbolic statements similar to those made in the past.
In any event, Saudi Foreign Minister Adel Al-Jubeir pointed out that there were serious obstacles to a production freeze deal. Speaking on September 5, he said that his country was willing to restrict oil output if other states did the same. He also noted, though, that Iran, another major producer of oil, was eager to raise production rather than cut it.