Major news coming out of Doha earlier Tuesday reveal Saudi Arabia and Russia have agreed to freeze output at January production levels. The two largest producers of oil in the world met in Doha, Qatar today in a meeting that have been months in the making agreeing to freeze production in the hope that prices will climb back up.
Smaller producing countries like Venezuela & Nigeria have been clamouring for an emergency meeting to help stem the outflow of oil from oil producers believing that it will help push prices back up. Ever since OPEC adopted a strategy to push oil prices down in order to box in Shale producers the price of oil has plummeted by over 70% which unfortunately has also affected smaller producers such as Nigeria, Angola and Venezuela.
Whilst the news of Russia and Saudi Arabia agreeing to cap oil production at January levels is a welcome relief, the impact is not expected to dent the downward trajectory of the price of oil. For example, Russia produced about 10.9 million barrels of oil in January which incidentally was its highest production output since the cold war. Saudi on the other hand produced 10.5 million barrels, its highest since June 2015. Since it is unlikely that they might have gone past this peak, capping the price of oil at these levels might not significantly impact prices.
The market reacted soon after with oil prices rising to an intra-day high of $35 before dropping to $32.