Oil prices rallied sharply Monday morning on reports that Saudi Arabia and Russia will make a joint statement at the G20 meeting; there was speculation that a freeze deal or something similar may be announced.
But as it turned out, the announcement was a bit of a damp squib. Russia and Saudi Arabia merely signed a joint agreement to establish a ‘working group’ in order to find ways to minimise volatility in the oil market, and there was no immediate plans to restrict crude output. What’s more, Saudi’s energy minister said that oil prices are improving and that freezing production is not the only solution.
As a result oil prices gave up most of their sharp gains. On Tuesday, at the time of this writing, Brent oil was trading around the key $47 support level ahead of this week’s US crude oil inventory reports on Wednesday (API) and Thursday (EIA). The short-term direction on Brent will be determined by what prices around this pivotal level.
So, uncertainty remains on the oil market ahead of this month’s unofficial meeting of the OPEC. They have talked the talk, now it is time to walk the walk. But judging by Monday’s events that is exactly what they are hopefully working towards with the largest oil producers finally taking some proactive steps in order to shore up oil prices.
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