Middle East > Saudi Arabia > Oil prices rally on Saudi-Russian pledge to steady prices

Saudi Arabia: Oil prices rally on Saudi-Russian pledge to steady prices

2016/09/12

Oil prices rallied on Monday by up to five % next key crude producers Russia and Saudi Arabia vowed to stabilise the market.

Saudi Energy Minister Khaled Al-Falih and his Russian counterpart Alexander Novak -- representing the world's two biggest oil producers -- declared they had agreed to "act together" to steady the market, on the sidelines of a G20 conference in China.

In reaction, Brent North Sea crude leapt as high as $49.40 a barrel.

US benchmark West Texas Intermediate (WTI) soared to $46.53.

Prices later pulled back as Saudi Arabia ruled out the need to trim back production.

The two nations "noted the particular importance of constructive dialogue and close cooperation between the major oil-producing nations with the goal of supporting the stability of the oil market", the ministers said in a joint statement.

"To this end the ministers agreed to act together or in cooperation with other oil producers," the statement said, adding they had agreed to set up a "joint monitoring group" to offer recommendations aimed at preventing price fluctuations.

- 'New era' -

Novak described the announcement as marking a "new era" in cooperation between Russia and Saudi Arabia and insisted that it would have a "critical significance" for oil markets, news agency Interfax reported.

However, there were no details on any transaction to freeze oil output around current levels, just weeks before Moscow and the 13-country Organization of the Petroleum Exporting Nations (OPEC) crude cartel meet in Algeria to discuss a world supply glut.

The globe's major oil producers have been unable to strike an accord on freezing output, owing mainly to a dispute between Saudi Arabia and Iran over Tehran's desire to raise production levels next the lifting of sanctions.

Next conference Novak, Falih told Al-Arabiya television channel there was "currently no need to freeze production".

"A freeze is one of the preferred options but it is not needed for the moment," he said.

OPEC and Russia together account for about half of the world's oil output.

Around 1200 GMT, prices had tempered their gains somewhat.

Brent for delivery in November stood at $47.55 a barrel, up 72 cents or 1.54 % from Friday's closing level. WTI for October was 66 cents at $45.10.

"The news was not all too significant next all," noted Forex.com analyst Fawad Razaqzada.

"Saudi's energy minister has said that oil prices are improving and that freezing production is not the only solution.

"So in general the news could have been a lot additional bullish for oil -- although that is not to say prices will not bounce back again."

Oil prices have been plagued by a stubborn supply glut that saw the market plunge to near 13-year lows below $30 at the start of 2016.

Although it has since recovered somewhat, the market is still far off the peaks above $100 that were scaled in mid-2014.

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