Oil & Gas Editorial: Blinking Chickens On The Oil & Gas Undercard

As the G20 Summit came to a close in the eastern Chinese megacity of Hangzhou, agreements brokered on the undercard of the main event may prove to be more significant.

In a powwow arranged as an adjunct to the global congress, Russian President, Vladimir Putin, and Deputy Crown Prince of Saudi Arabia, Mohammad bin Salman Al-Saud, signed an energy accord that could limit the two nations’ oil output in the future. The announcement of this bilateral oil deal saw the price of a barrel of Brent crude soar by almost five per cent within a matter of hours, as traders leapt on any glimmer of hope in a depressed market.  

The Russian Federation and Kingdom of Saudi Arabia currently produce around one fifth of the world’s daily oil supply, and although no respite in pumping is promised or even mooted in the short-term, the mere hint of abatement has given hope to an industry struggling under the yoke of sub-$50 oil crude. Analysts have suggested that this move may bode well for a larger-scale pumping freeze in the near future.

At the end of September, the International Energy Forum will take place in Algeria, and, as a matter of course, agents of the 14-member Organisation of Petroleum Exporting Countries (OPEC) will be present to take part in the discussion.

At the same time, the oil cartel will meet informally in the Algerian capital to debate their actions for the coming months. For the first time since the oil price descent began in Q4 2014, indications are that this might include a combined production restriction or even a scaling back on record levels of output.

Any such decision would have to would have to be made after a rapprochement of the two opposing factions within OPEC - the Saudi/Gulf axis and the “have nots”, spearheaded by Iran and counting financially-bereft members like Venezuela and Nigeria.

In this most geopolitical game of chicken, it seems that the one side may be about to blink….