Photographer: David McNew/Getty Images

Oil Pares Gains as Saudi Arabia, Russia Fall Short of Freeze

  • Russia ready to join agreement, energy minister says
  • Saudi minister says no need for production freeze right now

Oil pared gains as talks between Russia and Saudi Arabia over ways to stabilize the crude market fell short of a freeze on output.

Futures rose 1.6 percent in New York, after climbing as much as 4.7 percent before what was flagged as a “significant” announcement by Saudi Arabia’s Energy Minister Khalid Al-Falih at the G-20 summit in China. While there’s no need to freeze production now, Al-Falih said he was optimistic a meeting later this month between producers in Algiers would lead to an agreement. His Russian counterpart, Alexander Novak, said the two nations were seeking ways to ease oil market volatility. 

“The comments from the Saudi-Russia press conference today are nothing that we hadn’t already heard,” Giovanni Staunovo, an analyst at UBS Group AG in Zurich, said by e-mail. “Talk is cheap as it’s helping prop up oil prices.”

Crude rose the most in two weeks on Friday as President Vladimir Putin said he’d like OPEC and Russia to agree to an output freeze. Putin met Saudi Deputy Crown Prince Mohammed bin Salman on Sunday. Oil rallied last month amid speculation members of the Organization of Petroleum Exporting Countries and other producers would agree to cap production when they meet in Algiers. A similar proposal was derailed in April over Saudi Arabia’s insistence that Iran should participate.

West Texas Intermediate for October delivery gained 73 cents to $45.17 a barrel on the New York Mercantile Exchange before trading was halted at 1 p.m. There was no settlement on Monday because of the Labor Day holiday. The contract rose $1.28 to $44.44 on Friday, the biggest gain since Aug. 18.

Putin Intervention

Vladimir Putin pictured meets with Prince Mohammed Bin Salman Al Saud as part of the G-20 Summit in Hangzhou, China.
Vladimir Putin pictured meets with Prince Mohammed Bin Salman Al Saud as part of the G-20 Summit in Hangzhou, China.
Photographer: Alexei Druzhinin/TASS via Getty Images

Brent for November settlement rose 80 cents to settle at $47.63 a barrel on the London-based ICE Futures Europe exchange. The contract added 3 percent to $46.83 a barrel on Friday. The global benchmark crude traded at a $1.84 premium to November WTI.

Iran, which is increasing output following the end of sanctions at the start of this year, has yet to decide whether it may join a production freeze. The National Iranian Oil Co. faces no reason to restrict or cut output, state news agency Mehr said, citing Ali Kardor, a managing director at the company.

Putin said in an interview last week in Vladivostok that other producing countries now recognize Iran should be allowed to continue raising output since it was freed just months ago from international sanctions. The Russian president said at the time that he may recommend such a plan when he met with Prince Mohammed.

Statement Welcomed

While Russia and Saudi Arabia agree that Iran should be allowed to reach its pre-sanctions output, they have different views on whether the nation has already attained this level, Novak said Monday.

OPEC Secretary-General Mohammed Barkindo welcomed the joint statement by the Saudi and Russian energy ministers and urged other producers to support it.

Saudi Arabia led OPEC’s decision in 2014 not to cut output amid a global glut in order to protect market share and force out higher-cost producers. The group’s production rose to a record 33.69 million barrels a day in August, just under a third of global demand, a Bloomberg survey showed last week.

Oil-market news:

  • Ministers from the United Arab Emirates and Kuwait said they support the oil accord between Saudi Arabia and Russia
  • Iran is ready to raise output to 4 million barrels a day within two to three months
  • Iraq’s production rose to 4.64 million barrels a day in August, according to the state oil marketing company
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