Slippery summit

The Saudi-Russia oil deal is full of holes. The crude producers have agreed to freeze production at January levels. But both Russia and the Opec kingpin are already pumping nearly flat out. And Iran, which wants to raise output after years of sanctions, may not agree.

The pact announced on February 16 - such as it is - reflects intense financial pressure as major oil producers grapple with a 70 per cent slide in the price of a barrel of crude since mid-2014. Weaker crude producers like Venezuela, which also joined the deal along with gas producer Qatar, had been clamouring for a production cut.
 
A production freeze is considerably less ambitious, given the amount of crude already flowing. Saudi Arabia pumped a little over 10.2 million barrels per day last month, down slightly from a record of 10.6 million barrels per day in June. Russia's oil output, meanwhile, has been hitting new post-Soviet highs. It's also contingent on countries that were not even present at the deal talks joining in.

Iran is the big question mark. The Gulf producer's output is still one million barrels per day lower than it was before it was hit by international sanctions over its nuclear programme. It seems unlikely that the country would sign up for arbitrary limits on output just as it's starting to return to international markets.

The fact that Russia and Saudi Arabia were able to agree to anything is a sign of some progress of course - and probably explains why the Brent crude price rallied an initial six per cent before giving back its gains in the hours following the announcement. Saudi Oil Minister Ali al-Naimi told reporters the output freeze was the "beginning of a process." At best, it may create a diplomatic opening for a more ambitious deal later.