Two major oil-producing countries began discussions last week on the current state of the oil industry, specifically a year-long glut in the oil supply that is destroying profits.
Following the announcement, oil prices rose for the three consecutive days.
Russian Energy Minister Alexander Novack told the Saudi press that, “the dialogue between our two countries is developing in a tangible way, whether in the framework of a multi-party structure or on a bilateral level,” reports Reuters. Novack also said that Russia and Saudi Arabia, two of the largest oil producing nations, are ready to “put in place joint measures to achieve oil market stability, with the condition that these measures will not be for a limited period of time.” Novack noted that it is highly unlikely the market will return to stability until 2017.
Saudi Energy Minister Khalid al-Farih said his country would “work with OPEC and non-OPEC members to help stabilize oil markets,” reports CNBC.
What these nations decide will have drastic and profound effects on the oil market. Business Insider reports that last April, Saudi Arabia refused to cooperate with the rest of OPEC on a production freeze if Iran would not participate. Iran refused and Saudi Arabia left the meeting, essentially thwarting any progress to towards equilibrium.
Once the two nations began collaborations, oil prices rose from $42 a barrel to over $45 a barrel.
While Novack says these discussions are intended to bring about market stability, experts think they have more to do with state-owned Russian oil company–Rosneft.
The International Energy Agency (IEA) reports that “global oil demand growth is expected to slow from 1.4 mb/d in 2016 to 1.2 mb/d in 2017.” The IEA says this lower than expected prediction is based on “a dimmer macroeconomic outlook.”
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