Crude oil futures surged 5% overnight to their highest in a week on reports that Saudi Arabia and Russia were set to put aside their differences and work together on restricting output to end the current glut on world markets.
Saudi Arabia's veteran oil minister, Ali Naimi will meet with his Russian counterpart, Alexander Novak in the Qatari capital of Doha Tuesday, according to Reuters and The Financial Times. They will be joined by Eulogio del Pino, the oil minister of Venezuela, in the first significant political meeting since ministers from the Organization of Petroleum Exporting Countries failed to agree on an output ceiling in early December.
The news sent U.S. oil futures back up as far as $31.20 a barrel, over 18% above the 13-year lows they plumbed last week on concerns about slower global growth. The international benchmark blend Brent also surged over 5% to $35.11/bbl.
However, it was by no means clear that the meeting would result in any concrete action to lift prices. The Russian news agency Interfax had quoted Russia's liaison man with OPEC, Vladimir Voronkov, on Monday as saying that "Russia won't hold talks with OPEC as an organization on the question of cutting output. There is dialogue with individual countries who are members of the organization, and in the main it's going on through Venezuela."
Saudi and Russia are the world's two largest oil producers, and both countries pumped record amounts of oil last year in an effort to defend global market share. Venezuela has been the biggest casualty of that policy, which has crushed the price of its only significant export. It's now suffering inflation of well over 100% and shortages of even basic goods in the stores. Analysts say Venezuela will struggle to make its international debt payments later this year unless prices recover quickly.
Venezuela, under its populist, anti-American President Hugo Chavez, became a rare strategic ally of Russia in the western hemisphere, and an economic crisis there could see Moscow lose whatever influence it has. But the Kremlin has never placed so much value on its friendship that it actually cut its own output to help Caracas.
Reuters also reported that "several key OPEC members" will also attend the meeting, without specifying. Qatar, where the meeting is being hosted, is an OPEC member, but is one of its smallest. For any meaningful agreement to stick, it will need the cooperation of Iraq, which is pumping as fast as it can, and Iran, which is trying to raise its oil output by 500,000 barrels a day this year, now that U.N. sanctions on it have been lifted. Neither country has confirmed it will attend. Another important absentee, seemingly, is Igor Sechin, the chairman of Russia's largest oil company Rosneft, widely seen as the real decision-maker on all things related to oil policy.