Russian-Saudi Cooperation to Stabilize the Oil Market Likely a Head Fake....

With Russia and Saudi Arabia recently announcing cooperation to stabilize world oil markets, one has to wonder whether this is simply just a head fake. The world’s top two crude-oil producers pledged to cooperate to stabilize global oil markets at the recent G20 meeting in China, however, neither nation agreed to a production freeze or provided any specific measures to bolster prices. Further, Saudi's oil minister Al-Falih later denied there was any current need to cap production, saying “markets are trending in the right direction.” Saudi's oil minister also previously stated that "supply and demand will come more or less into balance this year", suggesting that Saudi believes the oil market will right size itself without any OPEC intervention. If the past is any indication, OPEC members have previously talked of ambitious measures to stabilize the world oil markets, but have lacked any decisive follow-up actions. Further, a freeze proposal was derailed in April over Saudi Arabia’s insistence that Iran participate. The one positive take away from Russian-Saudi cooperation is that it suggests the two oil giants have a growing trust and understanding that collaboration is vital to oil’s recovery. Should the meetings in Algiers not yield a production freeze, both Russia and Saudi Arabia have stated that they plan to coordinate a bilateral working group on oil and gas cooperation in October and will meet at the OPEC ministerial summit in Vienna in November. Skepticism aside, time will tell whether this new and rare Russian-Saudi pledge to cooperate will yield any concrete actions to stabilize global oil markets.