In an effort to propel a seemingly stalwart oil market, Russia and Saudi Arabia have decided to freeze their oil production, set to reach record levels. This is the first mutually coordinated oil lockdown coming from two of today’s more predominant oil producers, which should help counter a deadened market that has beat down worldwide economies and thrown the stock market into disarray.
Although the deal is preemptive and leaves out Iran, this cooperative oil freeze is significant. With an OPEC and non-OPEC countries usually miles apart on both policy and pricing, it should help to untangle the web of issues caused by weakened oil prices. Saudi Arabia also hinted they’d be open to further action, if necessary, even though the global supply glut may never see it’s end.
Prior to this coordinated effort, Saudi Arabia had resisted the notion cutting output would boost prices.
Saudi Minister of Oil, Ali Al-Naimi, was involved with the talks that created this agreement, citing market improvement and a more stable oil market during talks with Qatar, Russia and Venezuelan officials Tuesday. Should OPEC rivals decide to reduce supply, oil may stabilize and return to 2004 production numbers and prices.
Russia produced roughly 10.88 million barrels daily in September, amassing a record high. Saudi pumped 10.2 million barrels into the oil production mix, not quite near record highs yet enough to convince global producers to either increase output or find some creative way to slow the free-fall of prices.
While choking oil production may incentivize price changes across the board, Iranian officials aren’t convinced they’re prepared for public backlash. It should be noted that thousands of jobs have been lost in Texas alone since the market downturn, meaning any hope for American job recovery in the oil sector may rely on what Russia and other OPEC and non-OPEC countries can accomplish.
