Hollow crude oil deal
The oil price bounce sparked by the Saudi Arabia-Russia deal to freeze production had barely kicked in before volatility set in again.
That’s a good indicator of the deal’s probable effect, or lack thereof.
A handful of Opec (Organization of the Petroleum Exporting Countries) members may have backed it, but Iran, while hinting at support, hasn’t committed to coming on board.
Neither has Iraq.
And the freeze itself is somewhat irrelevant.
It is set at January levels, when Russia’s production was at a post-Soviet high and Saudi Arabia’s near record levels as well.
Given that output is running at about two million barrels a day over demand at those levels, an oil rally is unlikely—particularly when the US shale industry, a primary target of Saudi Arabia’s strategy to squeeze out high-cost producers, is proving resilient.
Unless the deal evolves into a broader, deeper agreement—unlikely for now—it will remain merely an attempt at signalling.
Empty signalling at that.