Saudi Arabia and Russia, the world’s two largest crude producers, agreed to freeze output after talks in Qatar. The deal to fix production at January levels will be “adequate” and Saudi Arabia still wants to meet the demand of its customers, Oil Minister Ali Al-Naimi said in Doha after the talks with Russian Energy Minster Alexander Novak.

Qatar and Venezuela also agreed to participate, Al-Naimi said. The freeze is conditional on other nation’s agreeing to participate, Russia’s Energy Ministry said in a statement.

Oil pared gains in London, after rising before the meeting amid speculation the countries would discuss production cuts. "This is an announcement of a production freeze among countries whose production didn't even grow recently," said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. "If Iran and Iraq are not a part of the agreement, it's not worth much -- and even then there is still a question of compliance."

More than a year since the Organization of Petroleum Exporting Countries decided not to cut production to boost prices, oil remains about 70 per cent below its 2014 peak. Supply still exceeds demand and record global oil stockpiles continue to swell, potentially pushing prices below $20 a barrel before the rout is over,Goldman Sachs said last week.

Iran, OPEC’s fifth-largest producer, ruled out any curbs on its oil production when the group met in December. It plans to boost output and exports by 1 million barrels a day this year following the lifting of international sanctions last month. This week the nation loaded its first Europe-bound crude cargo in four years. Iraq continues to boost production as it recovers from years of conflict and under investment. The nation’s output reached a record 4.35 million barrels a day in January and more increases could follow, according to the International Energy Agency.

Brent crude was 2 per cent higher at $34.06 a barrel at 10:01 a.m. in London, having earlier climbed as much as 6.5 percent.

Better foundation

"A freeze would not create an immediate U-turn, but it creates a better foundation for the price recovery in the second half," Olivier Jakob, managing director of consultant Petromatrix GmBh, said in a note to clients before the meeting concluded. The freeze deal comes after months of competition for market share between Russia and Saudi Arabia. Riyadh has taken the rare step of selling crude into Moscow's backyard of eastern European, while Russia overtook Saudi Arabia in oil exports into China. The two nations are also backing opposite sides in the Syrian civil war. According the IEA, Saudi Arabia produced 10.2 million barrels a day in January, below the most recent peak of 10.5 million barrels a day set in June 2015. Russia produced nearly 10.9 million barrels a day in the same month, a post-Soviet record, according to official data. Venezuela pumped 2.4 million barrels a day and Qatar produced 680,000, according to the IEA. Qatar will lead monitoring of the output freeze agreement, the nation's Energy Minister Mohammad bin Saleh al-Sada said at a press briefing. Low oil prices haven't been positive for the world, he said.

Bloomberg