FX.co ★ Rumors of Russia-OPEC negotiations provide crude with relief

Russia’s statements gave the crude market long-awaited momentum. The Russian government that had been refusing to trim its oil production over the recent months expressed its willingness to discuss this issue with the Organization of the Petroleum Exporting Countries (OPEC). A mere hint about a possible agreement with Saudi Arabia supported crude prices. The Brent price gained 3%, climbing to 32.72 dollars a barrel, and WTI futures rose by 1.6% to 31.93 dollars a barrel.

However, almost immediately after Russia said it was willing to discuss slashing oil output, Saudi Arabia denied these rumors, saying it knew nothing about a potential meeting with Russia next month, let alone production cuts. Independent observers say that Moscow’s comments can be regarded as a sign of readiness to reach a compromise with OPEC. Until now, the Kremlin used to be rather satisfied with the weak ruble as it helped the Russian economy avoid more serious consequences of a slump in oil prices. Moreover, Russia and OPEC face serious challenges in a process of signing a potential agreement. Saudi Arabia strives to protect its market share, especially in China where it directly competes with Russia. Russia, in its turn, is technically unable to cut its output in winter. Besides, Moscow and Riyadh have different viewpoints about the Syrian issue.

Still, Russian officials make loud statements on probable negotiations with Saudi Arabia and other OPEC members regarding the prospects of a coordinated production cut.