US stock futures switched between small gains and small losses on Monday, with markets closed for the Labor Day holiday and investors digesting an oil agreement between Russian Federation and Saudi Arabia.
Advertisement
Saudi energy minister Khalid al-Falih told a UAE-based television channel he was optimistic about cooperation with other producers ahead of a meeting this month in Algiers, adding that freezing production was not the only solution to a supply glut.
But no sooner did the ministers issue their statements than media noted that neither the Russians nor Saudis had actually agreed to freeze production, and Axel Herlinghaus, senior commodities analyst at DZ Bank AG, set the tone for the analytical community by stating, “At first appearance it sounds a little bit as new wine in old bottles; in the past there was no lack of ambitious announcements, but a lack of decisive follow-up actions”. “A freeze is one of the preferred options but it is not needed for the moment”, he said.
“They max production, then they talk freeze, and markets are so stupid they take this as positive”.
The plan was hatched between the world’s two biggest oil producers at the 2016 G20 Summit in Hanghzhou, China on Monday.
Russia’s Novak said he was open to ideas on what cut-off period to use if producer countries chose to freeze output.
In April, Russia was prepared to freeze output together with OPEC, but talks collapsed after Riyadh said it would agree to a deal only if Iran – OPEC’s third-largest producer – participated. President Vladimir Putin met Deputy Crown Prince Mohammed bin Salman on the sidelines of the G20 in China on Sunday and said they would work to address a global glut and overproduction that has hammered prices for the past two years.
Oil’s volatile ride was its second hectic session in a row with the Saudi/Russia pact fanning speculation that major producers could strike a firmer deal in Algeria later this month. “That would probably be the last thing they want as long as Iran is raising output”. It would later settle at $45.17 a barrel, gaining 73 cents or 1.6%.
Advertisement
“We are ready, if there is such a decision, to join” an oil output freeze, TASS news agency cited Novak as saying. Benchmark bonds were also back in favour amid the waning Fed bets, while emerging market stocks were headed for their best day since early July as the Fed and hot oil combination saw them soar 1.3%.
