Russia and Saudi Arabia issue joint statement on coordinate monitoring action on volatility in the market for crude oil. File Photo by ekina/Shutterstock
HANGZHOU, China, Sept. 5 (UPI) -- Recognizing a tilt to the supply side in the global market for crude oil, Russia and Saudi Arabia said Monday they'd work jointly to diminish volatility.
Russian Oil Minister Alexander Novak met on the sidelines of a summit for the members of the Group of 20 economies in China to discuss with Saudi Oil Minister Khalid al-Falih ways to reverse a slide in crude oil prices.
In a joint statement, both sides said the onus was on them, as two countries that combine to meet about 20 percent of the global demand for crude oil, to coordinate on ways to address widespread volatility in oil prices.
"The ministers recognize the current challenges in the supply side of the global oil market, including major contraction of capital investments in oil extraction on a global scale," the joint statement read. "There is an imperative to mitigate excessive volatility harmful to global economic stability and growth."
Both sides also agreed on a bilateral level to monitor the dynamics that can steer crude oil prices.
Crude oil prices tumbled in the middle of last week as market analysts discounted signs of bullish momentum building in the second half of the year. A mid-week report from the U.S. Energy Information Administration added negative pressure to oil prices after it recorded a larger-than-expected increase in U.S. crude oil stockpiles.
The price for Brent crude oil closed Friday at $46.83 per barrel after gains sparked by comments from Russian President Vladimir Putin that some form of coordinated action may be necessary in a market characterized by oversupply. That price point was more than 80 percent above the sub-$30 per barrel oil level from January, but 7 percent lower than when rumors first surfaced of a joint market effort in June.
Year-on-year, however, the price for Brent crude oil is down roughly 1.7 percent, suggesting that prices are more stable long-term than short-term. Some market watchers discounted the joint statement as verbal intervention, noting prices in recent weeks have moved wildly on the back of talks, as opposed to concrete action.
"The announcement by Saudi Arabia and Russia contains no specifics about how to reduce global supply, which is what is needed to speed the rebalancing of oil markets and start to draw down inventories," Alex Schindelar, an editor at the London-based Energy Intelligence group, said in response to emailed questions.
Prior to Putin's comments last week, Novak cast doubt about a production curtailment after telling Russia news agency Sputnik that oil priced in the $50 per barrel range was "normal." Saudi Arabia, meanwhile, is increasing production gradually to answer the call of short-term demand.
Similar efforts at a so-called freeze collapse earlier this year along multilateral lines. While struggling members of the Organization of Petroleum Exporting Countries support any action that would drive prices higher, others like Iran are wary of cutting output as producers struggle to protect their market share.
There was no reference to adjusting production polices in Monday's joint statement. Oil-producing nations meet later this month in Algeria to consider market issues.