This talk will cower the shorts but a significant cut will get...

This talk will cower the shorts but a significant cut will get oil rallying much higher.


Oil prices rocket on hopes of Saudi-Russian entente


Russian President Vladimir Putin shakes hands with Saudi Arabia's Defense Minister Prince Mohammed Bin Salman in the Konstantin Palace, St. Petersburg, Russia
Picture: Rex
By Mehreen Khan7:45PM GMT 28 Jan 2016

Crude jumps by more than 8pc as world's rival oil giants hint they could take as much as 2 millions barrels a day off the market
Oil prices staged a storming rally on Thursday, rising as much as 8pc on the hopes that Russia was ready to sit down with rival Saudi Arabia and agree a production cut for the world's flooded market.

Forward contracts for Brent crude soared as high as $35.85 on Thursday after Moscow's oil minister Alexander Novak said his government was willing to engage in "coordination" with Opec.



We had these sorts of consultations before, when the situation was somewhat different
Russian energy minister Novak





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Mr Novak said the Saudis were ready to talk about limiting supply and hinted Russian production cuts could amount to 500,000 barrels a day.

• Opec pleads for Russian alliance to smash oil speculators

Opec, which is led by its largest producer Saudi Arabia, controls nearly 40pc of the world's oil supply, but has been at loggerheads with producers inside and outside the group over limiting output.





The cartel's strategy to flood global markets has seen prices fall to their lowest level since 2003 at below $28-a-barrel, imperiling the public finances of some of its weakest member nations, such as Nigeria and Venezuela.

Intraday prices rocketed in mid afternoon trading on the hopes of a Saudi-Russian entente, before falling back to $34 after Opec refused to confirm or deny the reports.

• Oil could crash to $10 a barrel, warn investment bank bears

Russia is the largest non-Opec producer in the world and saw its output reach a post-Soviet Union era high in 2015.

Calls for an agreement between the two giant oil nations have escalated in recent days.

Abdullah al-Badri, Opec's secretary general said the cartel was ready to embrace rivals and thrash out a compromise following the 72pc crash in prices since mid-2014.

"Tough times requires tough choices. It is crucial that all major producers sit down and come up with a solution", he told an audience in London on Monday.

Any agreement would mark the first deal in more than a decade between Opec and its rival producers.

Mr Novak said the two sides - who make up 20pc of the world's oil supply - would discuss cuts of around 5pc from the world's markets, or 2m barrels a day.

"We had these sorts of consultations before, when the situation was somewhat different. As we see, prices have fallen," Mr Novak told the Interfax news agency.

• Mapped: How the world became awash with oil





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But analysts were sceptical that relations between Moscow and Riyadh had sufficiently thawed to get a deal.

"Saudi Arabia might be willing to change tack and agree to coordinated output cuts, but it is not obvious that Russia would be a reliable partner," said Julian Jessop, head of commodities research at Capital Economics.

"Russian companies cannot easily turn the taps off and on at this time of year due to the harsh winter weather. This makes access to remote sites difficult, and means that it is hard to re-start facilities once they are shut down", he said.