Price of oil jumps 5%
September 6, 2016: The price of oil jumped by 5% after Russia and Saudi Arabia discussed ways to stabilise oil prices on the sidelines of the G20 summit in China.
Both countries said they will not act immediately but could limit output in the future. The joint statement was signed by the respective energy ministers followed by a meeting between Russian President Vladimir Putin and Saudi Deputy Crown Prince Mohammed bin Salman.
Saudi Energy Minister Khalid al-Falih said that there is no need to “freeze production today, there is time to take this kind of decision”. However, he said, freezing production is one of the possibilities. The joint statement marks a significant development in the Saudi-Russia relationship. The two countries have been on opposite ends with regards to Iran and Syria.
Though most OPEC members have of late agreed to freeze production in order to stabilise the market, oil analysts do not have high hopes from the joint statement, especially after having seen OPEC try and fail to reach any sort of agreement for more than a year now. Also, the dynamics between various OPEC members is not very good, to say the least.
John Hall, chairman, Alfa Energy, says that though the announcement is significant, there is nothing much to gain from the statement since all OPEC parties need to agree to this. “I do not think Iran is going to agree on this soon since they are still below their pre sanction production level,” he says.
Putin, in an interview to Bloomberg, said that ‘from the viewpoint of economic sense and logic, it would be correct to find some sort of compromise. I am confident that everyone understands that. We believe that this is the right decision for world energy’. In fact, Putin disclosed that Russia had supported a freeze even in April this year.
OPEC will hold informal talks in Algeria later this month. Its next official meet is scheduled in November in Vienna.