Saudi Arabia and Russia forms working group to reduce volatility in the market

Global crude oil benchmarks are up more than 3 percent. WTI is currently trading at $45.7 per barrel and the Brent is trading at $2.5 per barrel premium to WTI. The major reason behind the rally has been the news that Russia and Saudi Arabia will be issuing a joined statement. It is now clear, however, that the market was expecting a lot more than what was delivered. WTI at one point was trading at $466 per barrel. Many traders in the market had thought that a production freeze could be coming.

However, it fell short of that. Russia and Saudi Arabia formed a working group to study ways to reduce volatility in the market. This could be the setting the stage for a production freeze in the future, maybe as early as later this month, when OPEC leaders would informally meet in Algeria, on the sidelines of IEA summit. But as of now, Saudi Arabia’s energy minister Khalid al-Falih said that since the price is recovering there is no need for a production freeze and it isn’t the only option available.

Nevertheless, as Russian energy minister described that the agreement is historic; it is in a sense that it indicates the closeness among two of world’s largest producers.