The oil price rose sharply today as Russia and Saudi Arabia agreed to start discussions on joint cooperation which may include a freeze on prices in the nearest future.
After the announcement oil jumped over 5 percent before succumbing to selling pressure to settle around US47.50c a barrel, as the market digested the news with analysts predicting a deal might not come so quickly.
The main driver for talks between the Saudis and the Russians was to support “stability in the market” which obviously means a floor or even higher prices as the year folds out.
Although a potential deal was in the making, the timing of one seemed very vague after comments to Bloomberg by Saudi’s Oil Minister Khalid al-Falih where he noted that although talks had begun a specific date was not mentioned,
“Freezing production is one of the preferred possibilities but it doesn’t have to happen specifically today,” he apparently quoted.
Iran, another major producer is another reason why the market is skeptical of any price freeze as they feel they have the right to make up for lost time while at the same time appearing to appease the Saudis and Russians,
“Iran remains a potential spanner that could yet throw itself into the works. It’s between a rock and a hard place, needing to appear on-board with the talks whilst simultaneously insisting on having the right to further increase output post sanctions, all the while not wanting to dent prices for everyone. Not an easy balance to strike,” said Mike van Dulken, at Accendo Markets.Publication source