Saudi Arabia, Russia sign oil pact, may limit output in future

[Independent voter]

Here's some news I thought I would never see. Maybe they can raise the price of oil by volunteering to reduce production? Maybe the US won't be able to offset that loss in production?

Oil is $47 a barrel today, Bloomberg says it's heading towards $10 soon.






http://in.reuters.com/article/g20-ch...-idINKCN11C0AR

Saudi Arabia and Russia agreed on Monday to cooperate in world oil markets, saying they will not act immediately but could limit output in the future, sending prices higher on hopes the two top oil producers would work together to tackle a global glut.
The joint statement was signed by the country's energy ministers in China on the sidelines of a Group of 20 summit and followed a meeting between Russian President Vladimir Putin and Saudi Deputy Crown Prince Mohammed bin Salman.
Russian Energy Minister Alexander Novak said the two countries were moving toward a strategic energy partnership and that a high level of trust would allow them to address global challenges. Saudi Energy Minister Khalid al-Falih said the agreement would also encourage other producers to cooperate.
Oil prices soared almost 5 percent ahead of a news conference by the two ministers, but pared gains to trade up 2 percent by 1130 GMT as the agreement yielded no immediate action.
"There is no need now to freeze production ... We have time to take this kind of decision," Falih said.
"Freezing production is one of the preferred possibilities, but it does not have to happen specifically today."
Even if the Monday statement was short on action, it marks a significant development in the Russia-Saudi relationship. The two countries have been effectively fighting a proxy war in Syria and Moscow also sees itself as a big ally of Iran - Riyadh's arch-rival in the Middle East.

FREEZE TALKS
The Organization of the Petroleum Exporting Countries will hold informal talks in Algeria later this month, and is next scheduled to meet officially in Vienna in November.
Several OPEC producers have called for an output freeze to rein in the glut, which arose as supplies from high-cost producers such as the United States soared.
The price collapse of the past two years has hit the budgets of major producers such as Russia and Saudi Arabia while leading to unrest and social tensions is smaller producing nations such as Venezuela and Nigeria.
OPEC's de facto leader Saudi Arabia has also signalled willingness to cooperate as it faces budget pressures and seeks to float a stake in state-owned producer Aramco.
Venezuela, which has consistently pushed for a deal to boost prices, hailed the agreement as "an important step in coordinating joint action between the biggest OPEC member and one of the biggest non-OPEC producers".
Venezuela has presented an "alternative proposal" to be considered at the upcoming Algeria meeting that would help "stabilize both the volume of supplies to markets and the fair price for producers," the Oil Ministry said in a statement.
The statement did not offer further details on the proposal.
Any deal between OPEC and non-OPEC producer Russia would be the first in 15 years since Moscow agreed to cut output in tandem with the cartel at the turn of the millennium, although Russia never followed through on that promise.
Novak said he was open to ideas on what cut-off period to use if producer countries decided to freeze output.
If production is frozen at early-2015 levels, it would effectively mean an output cut as most producers - including Saudi Arabia, Russia, Iraq and Iran - have steeply boosted production since then.
Novak said outright oil production cuts may also be discussed.

CRUDE OVERHANG
In April, Russia was prepared to freeze output together with OPEC, but talks collapsed after Riyadh said it would agree to a deal only if Iran - OPEC's third-largest producer - participated.
Iran has argued that it needs to regain market share lost during years of Western sanctions, which were lifted in January.
Putin said last week that a new deal on oil output could involve some compromise on Iranian output.
"We believe that the oil market rebalancing has been rather delayed ... And certainly joint actions which were considered at the beginning of the year, including a freeze, could have drawn much nearer the date of rebalancing of the respective markets," Novak said on Monday.
"We are ready, if there is such a decision, to join" an oil output freeze, TASS news agency cited Novak as saying.
Oil prices collapsed to as low as $27 per barrel earlier this year from as high as $115 in mid-2014, but have since recovered to around $50.
"The market is getting better and we noticed that the prices reflect this (improvement)", said Falih. "A coordinated and appropriate, collective decision on production will help bring balance and reduce inventories in a more timely manner".

(Additional reporting by Maria Kiselyova and Katya Golubkova in Moscow; Writing by Henning Gloystein in Singapore and Dmitry Zhdannikov in London; editing by Christian Schmollinger, Dale Hudson and G Crosse)

[Deleted]

Maybe they can raise the price of oil by volunteering to reduce production? Maybe the US won't be able to offset that loss in production?

saying they will not act immediately but could limit output in the future,

This is noting more then emty positioning, becuse both Russia and Saudi Arabia have economic difficulties and cant affored to reduce production in a such way to have a lasting impact on the world market.

[Deleted]

The us gets less than 5% of our oil from the middle east, vast majority we get ourselves. Tycoons have just been using middle east as an excuse to raise oil prices whenever they feel like it.

The price of something applies regardless of the source. For example say that a most of X is obtained through a long process that costs a lot. Naturally X costs a lot. You magically find a bunch of X just sitting around. You sell at a lower price than the current price, not at next to nothing.

[TrumpIsPresident]

China, Russia, the ME growing strong.
Western Europe, USA becoming weak.

Keep calm and hail Mother Russia.

[TheImperios]

Yeeeeees...

[Cyberowl]

Well, not like the last oil production agreement didn't fail the day after it was signed...

[Zarc]

China, Russia, the ME growing strong.
Western Europe, USA becoming weak.

Keep calm and hail Mother Russia.

How are China, Russia, ME growing strong? How is Western Europe and USA becoming weak? That's ridiculous.

The US have arguable the strongest economy among major countries in the world today. Europe's economy has its share of problems, sure. Russia's economy is down the drain. China has a huge debt problem. The Middle East is incredibly unstable. Russian elite and society as a whole is immensely corrupt, and China is a communist dictatorship. They are countries that are not free. This alone makes them weak. Strength is having freedom, which we have in the US and Europe. Russia is especially weak, as they don't even have a system. Unless you consider Vladimir Putin a system. Nobody knows what will happen in Russia when Putin's time ends, what chaos will erupt, and unlike what his fanboys may believe he is not an immortal superman, that day will come. The US on the other hand could probobly even survive a Trump Presidency because it has a strong constitutional democracy with working checks and balances on different branches of government. It doesn't rely on any one particular individual. The US is immensely strong. Though of course the world is not black and white, so there is weakness in the US and Europe as well. But this weakness is self-inflicted by the sad and pathetic loss of self-confidence in some of our citizenry that would have them turn from liberty, democracy and justice to imitations of authoritarian strongmen like Putin whose corruption is on a scale inconceivable to the contemporary Western world. Our weakness at this moment simply touch on the endless void of weakness that is present day Russia.

[Mihalik]

Meaningless posturing meant to soothe Crazy Cat Lady known as The Markets.

This will bring absolutely no meaningful change to the current downward price trend which is driven by a drop in demand (which in is turn driven by a combination of years of overpriced oil forcing technological divestment from it and a shitty global economy) and a never ending rise in output.

The damage is done and cannot be undone. A rise in prices would fund the Iranians (Saudi Arabia's worst nightmare) and US domestic producers.

If the Saudis and Russia cut back on production, they will instantly lose market share to Iran, US and countries like Nigeria.

As someone who worked in the oil industry at logistics level I can tell you with outmost certainty nothing will come of this and the downward trend will continue for the medium-short term followed by an eventual moderate climb back up in a few years time.

Don't invest in oil unless you can sit on it for a few years, even then invest in companies with larger and diverse energy portfolios.