Increase in Oil Prices Following 'Agreement' Between Saudi Arabia and Russia

Following reports of agreements regarding oil production levels 'between Saudi Arabia and Russia without Iran's participation', oil prices have risen. The Russian news agency Interfax reported on April 13 that an agreement was reached between Riyadh and Moscow to maintain crude oil production levels ahead of the Doha meeting. Following this report, oil prices in New York rose by up to 4%, with Texas oil reaching $42.17 and Brent improving by $1.86 to $44.69 per barrel. The Associated Press reported that the stock market also reacted positively to news of cooperation between Saudi Arabia and Russia regarding oil production, with improvements in stock markets attributed to better conditions for oil companies. According to the Associated Press, the Russia-Saudi agreement has led to the best oil price growth in the past four months. The Interfax report on the agreement between Riyadh and Moscow cited an unnamed diplomat who stated that this agreement 'does not depend on Iran's participation'. Dmitry Peskov, the spokesperson for the Kremlin, also told reporters that 'there is hope' that an agreement to maintain production without Tehran's stance can be achieved. Phil Flynn from the Price Futures Group in Chicago told the Canadian newspaper Globe and Mail that the market is now assured that the price war led by Saudi Arabia and some OPEC countries is nearing its end. Increased oil production and a severe drop in prices have caused many shale oil producers, whose production was profitable at higher prices, to exit the market. Bloomberg News also quoted Mike Wittner, head of oil markets at Societe Generale in New York, stating that 'the market's reaction clearly indicates that a final agreement will be reached'. According to Bloomberg, Saudi Arabia, the largest oil producer in OPEC, had previously stated it would only agree to cut production if other producers, including Iran, also joined. However, Kuwait announced that an agreement could be reached without Iran's participation. Iran will participate in OPEC negotiations on this matter, but Tehran has repeatedly emphasized that it will not reduce its production with the lifting of nuclear sanctions. Additionally, Margaret Yang, an analyst at CMC Markets in Singapore, told AFP that trading should remain cautious until next week and the Doha meeting. OPEC members and major oil producers outside the organization, including Russia, will meet on April 17 in the Qatari capital. Ms. Yang also mentioned that stock market players are awaiting official information from the U.S. regarding the needs of this largest energy consumer for oil. The United States, China, Japan, and India are the largest oil consumers, but consumption in the U.S. remains higher than the total of the other three countries.