Experts: Saudi-Russian agreement vital for stability of oil market

Experts: Saudi-Russian agreement vital for stability of oil market
Updated 07 September 2016

Experts: Saudi-Russian agreement vital for stability of oil market

Experts: Saudi-Russian agreement vital for stability of oil market

RIYADH: Saudi Arabia and Russia on Monday signed agreement for cooperation in the oil market, including putting a curb on production, which immediately caused prices to rise strongly on the hope that the two world’s biggest oil producers work together to address the global supply glut of crude oil, local media reported.

The agreement was signed by the Saudi and Russian energy ministers on the sidelines of the meetings of the G20 summit in China, following a meeting that brought together President Vladimir Putin and Deputy Crown Prince Mohammad bin Salman.
Minister of Energy, Industry and Mineral Resources Khalid Al-Falih said freezing oil production is not necessary at this time, soon after signing the cooperation agreement with Russia. “There is no need now to freeze production; we have enough time to take a decision on that, although freezing production is one of the preferred possibilities, but it does not have to happen specifically today. The market situation is improving on a day-to-day basis and we have noticed this is reflected in the prices,” Al-Falih was quoted as saying by the media.
Russian Energy Minister Alexander Novak said the two countries are moving toward a strategic energy partnership, and the high level of trust would allow the two sides to face global challenges.
Emirati Energy Minister Suhail Al-Mazrouei hailed the signing of the agreement between Saudi Arabia and Russia, the two biggest oil producers in the world, for cooperation in the oil market.
He was quoted as saying on Twitter: “We believe this positive step comes within the framework of the keenness of the two biggest oil producers to stabilize the market, and for the best interests of both the producers and consumers.” He added: “The United Arab Emirates, as an active and responsible member of the Organization of Petroleum Exporting Countries (OPEC), will always support any joint efforts to stabilize the oil market.”
Kuwait, a member of OPEC, also welcomed the consultations between Saudi Arabia and Russia on oil markets, confirming it is a backup for the outcomes of these consultations.
Acting Oil Minister Anas Al-Saleh was quoted as saying by KUNA that his country supports the outcomes of the consultations for achieving stability of the world oil market, expecting the market to recover during the last quarter of this current year.
Oil experts described the agreement as historic within the framework of world oil agreements, as it brings together the two biggest oil producers in the world.
This agreement was preceded by the Doha Declaration, which came out to freeze production at levels of January 2014, between the Kingdom, Venezuela and Russia.
But it was met with a lack of commitment by the other states and was aborted early. This latest agreement signed in China is new in terms of its mechanisms and terms upon which Al-Falih said aim to encourage other countries to participate, and that the agreement seeks to monitor the oil market, and work on its stability.
Dr. Rashid Al-Abanumay, president of the Center of Petroleum Policy and Strategic Outlook said the Saudi-Russian agreement is an agreement on principles.
“The agreement is not new; Saudi Arabia and Russia previously signed an agreement in Doha under Venezuelan mediation. It is no doubt that the current agreement now between two biggest oil producer is very important for the stability of the markets and will avoid all the mistakes that were made in Doha, and will contribute to rising prices at least in the foreseeable future,” explained Al-Abanumay.
Oil expert Hajaj Bou Kaddour said this is a very important agreement, adding: “It is the result of great efforts culminated in the signing of one of the most important agreements in the oil market.”
He hoped this agreement will achieve stability in the world oil markets and the rising of prices to normal levels.
Ammr Kurdi, assistant professor of accounting at the College of Industrial Management of King Fahd University of Petroleum and Minerals said although many analysts and observers of the energy markets were expecting an announcement in this regard between Saudi Arabia and Russia, to put a ceiling on oil production, the announcement of broad lines of the agreement by the two countries’ energy ministers is historic and unique by all accounts.
“The Kingdom and Russia are today the most influential states in energy and oil production. And this agreement is a positive step in the right direction and a most successful step for the best interests of the two countries,” he added.