ABUJA – The positive discussion between Russia and Saudi Arabia to stabilise oil market is helping oil price to pick up as a deal reached by both countries prompted price to jump to $47.31 a barrel Monday.
The announcement was made by the countries’ energy ministers, Alexander Novak and Khalid al-Falih, a BBC report said.
rice of Brent crude oil initially jumped by 4 percent but then pared gains to stand 1 percent higher at $47.31 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”.
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.
However the Saudi Arabian minister Falih said that freezing output was not “necessary” now.
“Freezing (production levels) is one of the preferred possibilities but it’s not necessary today,” he 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.
Despite this immediate divergence of view, Mr Novak told reporters that he favoured choosing a month, from the second half of this year, which would be the benchmark for a production freeze.
He added that Russia would accept any month for this purpose, and that it was important for other countries to support the proposal, possibly including a cut in production.
Strategies to keep oil 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 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.”