Rumors that oil giants Saudi Arabia and Russia might work together to curb their booming output spurred a spike in oil prices and lifted global stock markets on January 26.
Iraqi Oil Minister Adel Abdulmahdi said at a conference in Kuwait that Russia is showing increased “flexibility” on working with the OPEC oil cartel to try to rein in the surplus production of crude that has caused a glut on world markets and has been depressing global stock markets and economic growth.
Abdulmahdi added that Baghdad is also "ready to cooperate" on cutting production to raise oil prices, but only if non-OPEC producers like Russia do so as well. Iraq’s announcement that it hit record production levels last month had sent world oil prices and stock markets spiraling downward on January 25.
Abdulmahdi’s statement about Russian cooperation with the Organization of Petroleum Exporting Countries follows a report by Russia’s TASS news agency that Leonid Fedun, vice-president of Lukoil, has asked the Kremlin to work with OPEC to limit output and put a floor under plummeting prices.
OPEC secretary general Abdullah el-Badri has repeatedly called producers inside and outside the cartel to work together to boost prices, and Venezuela has engaged Russia in a dialog about the measures needed to do so.
However, the Kremlin has never explicitly said it would work with OPEC and Russia in the past has distanced itself from such suggestions.
Still, in global markets where investors are hoping for news that will stop the collapse in oil prices, which are down by nearly 75 percent since 2014, the statement by the Iraqi oil minister sufficed to cause a dramatic rebound.
U.S. premium crude prices jumped nearly 4 percent to $31.45 a barrel in New York while Brent crude prices shot up to $31.80 in London on January 26.
Global stock markets followed suit, with the Dow Jones Industrial Average surging 282 points or nearly 2 percent and other major indexes in the United States and Europe posting gains of 1 percent or more.
The gains proved short-lived when trading resumed in Asia on January 27, however, as fresh news about China’s slowing economic growth once again exerted pressure on stocks and oil prices.
Many oil analysts are skeptical, in any case, that oil producers – which are all strapped for revenues amid plunging prices -- are close to any agreement to cut production.
"Vague talk of a possible joint production cut with Russia and OPEC is doing the rounds again," noted CMC Markets analyst Jasper Lawler.
"Any joint action seems unlikely,” he said, noting that “U.S. shale producers would just use the resulting higher prices as an opportunity to ramp up their own [output] again."
A glut of U.S. shale oil production in 2014 was blamed for sparking the global fall in oil prices.
With reporting by AFP, Reuters, and Bloomberg