Oil prices hit a 14-month high and the FTSE 100 recorded its second-highest close on record yesterday after Vladimir Putin suggested Russia would take part in a production cut alongside the Organisation of the Petroleum Exporting Countries (Opec).
The Russian President told the World Energy Congress in Istanbul he supported the agreement reached by Opec in Algiers last month to cut output by 700,000 barrels per day, and said Russia was prepared to take part in the deal.
The world’s largest oil exporter, Saudi Arabia, joined the bullish talk at the World Energy Congress yesterday and UK energy giant BP was also hopeful of a rise in prices over the final two months of the year.
Khalid al-Falih, Saudi Arabia’s energy minister, said he was confident Opec could fine-tune the details of its production cut by the time of its next full-blown meeting in November, adding: “It is not unthinkable we could see $60 [a barrel].”
BP chief executive Bob Dudley also saw $55 to $60 as a potential range should Opec finalise a deal.
Signalling his intent to join the Opec agreement, Putin said: “In the current situation we think that a freeze or even an oil production cut is likely to be the only right decision to maintain the stability of the global energy sector.”
He added: “Russia is ready to accede to joint measures to reduce production, and is calling on other oil exporters to do so.”
Brent crude, the global benchmark, jumped 2.4 per cent on the comments to hit $53.17 a barrel – its highest level since August 2015. The US benchmark, West Texas crude, climbed three per cent to $51.28.
London’s commodity giants bounced on the prospect of a sustained rise in oil prices, helping the FTSE 100 to close at its second highest level ever.
The blue chip index finished the day up 0.8 per cent at 7,097, just six points shy of the overnight record set in April 2015. BHP Billiton, Royal Dutch Shell, Anglo American, Rio Tinto and Glencore all recorded two per cent gains for the day, after the price of metals also climbed.
Fawad Razaqzada, an analyst at Forex.com, cautioned that, in order to keep oil prices above the crucial $50 level, producers would have to “walk the walk” when it comes to cuts, rather than simply talking up the price.
“Many oil producing nations such as Russia know how punishing the markets can be, so they may well succumb to pressure and actually reduce supply this time around, because failure to do so would be disastrous,” he said.