Oil price jumps 5% as Russian Federation and Saudi energy ministers unite

Critics say any freeze would be mostly symbolic - OPEC is pumping more oil than ever before, and capping production at extremely high levels wouldn't really help fix an oversupplied market.

The world's two largest oil producers, Russian Federation and Saudi Arabia, on Monday agreed to act together to stabilize global oil output, though it's unclear what that might entail, according to CNBC.

In reaction, Brent North Sea crude leapt as high as $49. At last check, WTI oil futures were up 1.4% at $45.38 a barrel. Saudi Arabia, meanwhile, is increasing production gradually to answer the call of short-term demand.

While the Saudi minister played down the prospect of imminent action, his Russian counterpart Alexander Novak said he was open to ideas on what cut-off period to use if countries chose to freeze output and said even production cuts could be considered... A similar proposal was derailed in April over Saudi Arabia's insistence that Iran participate.

The Organization of Petroleum Exporting Countries has a responsibility to restore market stability and Iran will support efforts to bring about fair prices, Rouhani said at the meeting, which was also attended by Oil Minister Bijan Namdar Zanganeh. Citing the distressed economic situation fueled by the imposition of Western sanctions over its nuclear program, Iran plans to continue with its historical output quota of around 4.2 million barrels per day.

After meeting Novak, Falih told Al-Arabiya television channel there was "currently no need to freeze production". "Output freezing is one of the preferred possibilities but is not a necessity in the meantime", said the Energy Minister. Russia's oil output is hovering near a post-Soviet high while Saudi Arabia's reached a record high in July. Prices pared gains as the two nations stopped short of revealing any concrete steps to limit output. It turned out to be a lot less than that and Brent dropped back to 47.93 within an hour.

Petrochemical stocks outperformed on Tuesday morning, with Saudi Basic Industries up 1.2 per cent, and miner Ma'aden rose 3.2 per cent after it said a subsidiary had started trial production at a new ammonia plant.

After Friday's underwhelming U.S.jobs report, Fed Funds futures prices indicated investors were now pricing in only around a 20 percent chance of a September hike, down from over 30 percent beforehand.

"The news was not all too significant after all", noted Forex.

28, representatives of 73 member states of the International Energy Forum (IEF) are set to meet in the Algerian capital to discuss oil-related issues.

  • Leroy Wright