Oil price jumps on Russian and Saudi agreement

The price of oil has jumped by about 3% after Russia and Saudi Arabia reached an agreement to look for ways to stabilise the oil market.

The announcement was made by the countries’ energy ministers, Alexander Novak and Khalid al-Falih.

The price of Brent crude oil rose by $1.28 on the news to $48.11 a barrel.

A statement said the plan was to support the “stability of the oil market… ensuring a stable level of investment in the long term.”

At the start of 2016 the price of oil fell to its lowest level in nearly 13 years due to a production glut and is still far below the $110 a barrel price recorded just two years ago.

Mr Novak said the agreement, which might include attempts to limit oil output, was a “historical moment” between members of OPEC, which is the traditional oil producers’ cartel, and non-members, of which Russia is one.

He added that Russia was willing to join an oil output “freeze”.

‘Getting better’
But his counterpart Saudi Arabian Falih said that freezing output was not “necessary” now.

“Freezing (production levels) is one of the preferred possibilities but it’s not necessary today,” Falih told the Saudi-owned Al Arabiya TV after the cooperation agreement was unveiled.

“The market is getting better and we have noticed that prices reflect this (improvement),” he added.

Strategies to keep prices high by limiting production are usually the preserve of OPEC and are often not successful.

However Russia and Saudi Arabia are the world’s two largest oil producers.

The two countries’ ministers’ will meet again later this month and again in October and November.

The outline agreement, to set up a joint task force, was publicised at a news conference at the G20 summit taking place in the eastern Chinese city of Hangzhou.

The agreement to talk about a deal, despite the lack of detail, was welcomed by two other oil producers.

“This dialogue confirms that the main oil producers are watching the oil market… to help achieve stability,” said Kuwait’s acting oil minister Anas al-Saleh.

The UAE energy minister Suhail al-Mazroui tweeted: “UAE, as an active and responsible member of OPEC will always support any joint efforts which will benefit market stability.”

BBC