RUSSIA and Saudi Arabia have agreed to work together to stabilise the oil market and boost the application of technology for oil production and refining.
The deal was signed today by the energy ministers of both countries at the G20 Summit in China. The two countries – the world’s top oil producers by volume – are responding to a sharp fall and continued lull in oil prices, and say they will consider “freezing oil production” to stabilise the market. The announcement saw prices climb 3% to just over US$48/bbl – still far below the US$110 price from two years ago.
“We have several specific instruments of joint efforts, including […] the so-called freeze,” Russia’s energy minister Alexander Novak said at the signing ceremony, reports Russian news agency TASS. “We’ve agreed with our colleague that a working group will be set up to work out recommendations on joint actions aimed at delivering stability and predictability of the markets.”
Efforts among producers to lift oil prices by limiting production have been hampered by political infighting among OPEC’s oil cartel members. Oil ministers from members and non-members of OPEC met in April for what was the first effort at co-orientating oil production in 15 years but failed to reach an agreement.
The effect of the low oil price has hit exporters hard, with Bloomberg reporting in April that the world’s top 18 producers have burned through around a fifth of their foreign exchange reserves – worth US$315bn – since November 2014. Saudi Arabia and Russia are now demonstrating a willingness to co-ordinate market stability without OPEC, with Saudi energy minister Khalid Al-Falih noting interest among other producers.
“I have to say all other producers are expressing interest in coordinating... with Saudi Arabia and other like-minded countries to reach a consensus,' Al-Falih said. He warned that if other countries do not agree to co-ordinate action, Russia and Saudi Arabia will act alone. The new task group will hold its first meeting in October.
The ministers also agreed to promote co-operation among their industries, including “deployment of new technologies, exchange of information and expertise to raise the level of technology applications in production, refining, storage, transport and distribution, as well as equipment production, support services such as engineering, manufacturing and research activities, along with collaboration in power generation and renewable energy.”
This initiative follows Saudi Arabia’s announcement earlier this year of an initiative to rapidly diversify its economy with Deputy Crown Prince Mohammed bin Salman describing the country’s reliance on oil “a dangerous addiction”.
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