Oil gains as Saudi Arabia to make statement after Russia talks

London - Oil gained as Saudi Arabia prepared to make a "significant" announcement following discussions with Russia over promoting market stability.

Futures gained as much as 4.3% in New York after Saudi Arabia and Russia agreed to work together to stabilize prices following Sunday’s meeting between Deputy Crown Prince Mohammed bin Salman and President Vladimir Putin.

Saudi Energy Minister Khalid Al-Falih will make the announcement at the G20 summit in China on Monday, according to his chief of staff.

Crude rose the most in two weeks on Friday as Putin said he’d like members of the Organisation of Petroleum Exporting Countries (OPEC) and Russia to agree to an output freeze.

"The market seems to be positioning for the vague possibility of a substantial statement" by Saudi Arabia, Axel Herlinghaus, senior commodities analyst at DZ Bank said by e-mail.

Oil rallied last month amid OPEC speculation and other producers would agree to freeze output when they meet later this month in Algiers.

A similar proposal was derailed in April over Saudi Arabia’s insistence that Iran should participate.

West Texas Intermediate for October delivery was at $46.22 a barrel on the New York Mercantile Exchange, up $1.78 at 10:01 a.m. in London.

The contract rose $1.28 to $44.44 on Friday, the biggest gain since August 18. Total volume traded was about 89% above the 100-day average.

Putin intervention

Brent for November settlement was $2.13 higher at $48.96 a barrel on the London-based ICE Futures Europe exchange. The contract added 3% to $46.83 a barrel on Friday. The global benchmark crude traded at a $1.90 premium to November WTI.

Iran, which is increasing output following the end of sanctions at the start of this year, has yet to decide whether it may join a production freeze. The National Iranian Oil Company faces no reason to restrict or cut output, state news agency Mehr said, citing Ali Kardor, a managing director at the company.

Putin said in an interview last week in Vladivostok that other producing countries now recognize Iran should be allowed to continue raising output since it was freed just months ago from international sanctions.

The Russian president said at the time that he may recommend such a plan when he met with Prince Mohammed.

Saudi Arabia led OPEC’s decision in 2014 not to cut output amid a global glut in order to protect market share and force out higher-cost producers. Group production rose to a record 33.69 million barrels a day in August, just under a third of global demand, a Bloomberg survey showed last week.

Oil-market news:

Oil market at "tipping point" of demand outstripping supply: BP OPEC Secretary-General Mohammed Barkindo will meet Iranian Oil Minister Bijan Namdar Zanganeh in Tehran in the coming week and discuss the manner of implementing a proposed OPEC production freeze plan: Mehr.

The number of US rigs drilling for oil rose by 1 to 407, the ninth increase in 10 weeks, Baker Hughes Inc. reported on Friday.