Russia and Saudi Arabia signed a new agreement that has a goal of stabilizing the worldwide oil market, according to TASS the news agency in Russia that is state-owned.
The two countries pledged to set up a group, along with other types of measures with the goal of supporting an oil market that has been hit hard but a huge collapse in prices since 2014. On Monday, the prices of oil increased by 3%.
The new agreement was first announced at the G20 summit being held in China. It should help to set an agenda for a meeting that is being called informal, between members of OPEC and other nations that produce oil in Algeria later this month.
Tighter collaboration between the top two world exporters of oil might increase the hopes that other big oil producers along with OPEC will come to an agreement to freeze their production.
The thought is that a cap on output would help create a floor under the prices, which have increased from a February low of $26 a barrel to approximately $46 but are over 50% less than they were in June of 2014.
Critics are saying that any freeze would only be symbolic as OPEC already is pumping more crude than it ever has before and freezing that production at such high levels would not help fix a market that is already oversupplied.
The price of oil has bounced on similar hopes before, only for those hopes to be then dashed. Most recently, there was an attempt to freeze oil production this past April but it failed.
The lack of any cooperation following a price collapse of two years reflects the split within the OPEC between its largest member Saudi Arabia and the Islamic Republic of Iran, which continues to increase production following years of sanctions by the West.
It was not clear Monday how Iran is going to react to the new agreement that Russia and Saudi Arabia signed.
Russia is not an OPEC member but might send a representative later this month to Algeria for the meeting.
Saudi Arabia leads the strategy of OPEC of producing more oil or bust in order to defend the market share it holds. The Gulf kingdom pumped over 10.5 million barrels daily during July, which was up more than 30,000 from its tally in June and established a new record.
At the same time the United Arab Emirates, Iran and Iraq also increased their output, which compensated for less production from embattled members of OPEC Venezuela and Nigeria.
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