Hangzhou : Russia and Saudi Arabia have agreed that joint efforts should be made to stabilize the oil market by controlling the oil prices, which are experiencing a fall for two consecutive years. It was informed that the two countries signed an agreement in this regards on the sidelines of the G-20 summit in China. As per the agreement, the two countries have decided to set up a ‘Joint task force’ in order to stabilize the oil market. This decision was welcomed by Qatar, Kuwait and the United Arab Emirates. It is said that this agreement between the world’s leading oil producers may alter the existing equations of the oil market.
The prices of oil have slashed from over $100 per barrel to less than $30 during the last two years. The steep fall in the prices strongly affected the economies of the oil producing countries. In the meanwhile, the US created its own niche in the oil market by not only becoming self-reliant in the oil production, but also exporting the oil, thanks to the ‘shale oil’ production. Since the US wanted to increase its share in the oil market, Russia and Saudi Arabia had refused to reduce their production and exports.
Since other countries also adopted the same path as Russia and Saudi Arabia, the oil market experienced more supply than demand and this proved to be an obstacle in increasing the oil prices. Since it was the oil producer countries only, which got most affected by this, a feeling of dissatisfaction was growing amongst them. Six months ago, Russia and Saudi Arabia took the lead and gave indications to reduce the oil production.
But the plan got scuttled, as Saudi backed out at this crucial juncture, over ‘Iran’ issue.
Even then, it was apparent from the happenings in last few months, that Russia had continued talks with Saudi over the issue of stability in the oil market. The Russian President Vladimir Putin had, in an interview before the start of the G-20 Summit, given implicit indications about the efforts going on for bringing stability in the oil market. He had stated in the interview that the impasse in the oil market must be solved through discussions. At the same time, he had claimed that joint efforts are on with Saudi and will be successful.
On the sidelines of the G20 summit, the Russian President, in a special meeting, held discussions with the Prince of Saudi Arabia ‘Deputy Crown Prince Mohammad Bin Salman’. In the discussions, Saudi Arabia gave indications about cooperating with Russia over the issue of stabilizing the oil market. After that, information was given on Monday that the Energy Ministers of the two countries signed an agreement about cooperating in the oil market. The Russian Energy Minister Alexander Novak, in a statement issued at the time, said that Russia and Saudi hold the responsibility for stabilizing the oil market.
Saudi Energy Minister Khalid Al-Falih, while mentioning that the agreement with Russia was vital, expressed confidence that other countries also will support it.. He indicated that though no decision was taken in the meeting about putting a cap on the oil production, it may nevertheless prove to be good option in the future. The Saudi Energy Minister also informed that henceforth regular discussions will be held between the two countries over the issue of regulating the oil market among other issues and that a ‘Special Task force’ has been formed for the same.
After the agreement on Monday between Russia and Saudi, the prices in the oil market had temporarily bounced. But soon the prices again fell, in the absence of any concrete announcement regarding putting a cap on the production. However, considering long term effects, the agreement between the two countries may alter the present equations of the oil market.