Brent crude price rise has softened following the agreement by the world’s two largest crude producers, Saudi Arabia and Russia, to freeze output.
Many analysts had expected a cut to output, so the freeze prompted the price of oil to fall. Brent crude had earlier climbed as much as 6.5%.
Russia says its freeze is conditional on other producers agreeing.
Given that OPEC, the oil cartel of which Russia is not a member – cannot seem to agree on supply levels it is hard to imagine these output promises being kept.
According to the International Energy Agency (IEA), Saudi Arabia pumped 10.2 million barrels a day in January, nearly 3% below the most recent peak of 10.5 million barrels a day last June.
Qatar’s energy minister Mohammed Saleh Al Sada said the low oil price has not been positive for the world. Last month, Bank of England governor Mark Carney said lower prices were “good for growth in the medium term” and a “net positive for the global economy”.
Simon French an economist at Panmure Gordon attributes the recent stock market plunge to oil states having to offload their equity holdings to plug huge deficits which have arisen as a result of the oil rout.
On Tuesday morning Norway announced that its economy contracted at the fastest rate in three and a half years as lower oil prices take their toll on its economy.