"The failure of Russia and Saudi Arabia to take any steps to support the market is sending us lower," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. "The Saudi oil minister actually talked the market lower, which is going to cost his country billions." 

Brent rose the most in three weeks on Friday after President Vladimir Putin said he’d like OPEC and Russia to agree to an output freeze, speaking before he traveled to China to meet Saudi Deputy Crown Prince Mohammed bin Salman. Oil had rallied in August on speculation that members of the Organization of Petroleum Exporting Countries and other producers would agree to cap output when they meet informally in Algiers later this month. A similar proposal was derailed in April over Saudi Arabia’s insistence that Iran participate. 

Eoin Treacy's view

Russia, more than most countries, must want to see oil trading at higher prices. It’s by far their most important export and is responsible for funding not only public services but the country’s adventurism in Eastern Europe and The Levant. Saudi Arabia on the other hand has deliberately used oil as a policy tool in its attempt to deprive Iran, against whom it is engaged in open conflict in Syria, Yemen and Iraq, from deriving any advantage from the loosening of sanctions. If Saudi Arabia were to agree to Russia’s terms without a commensurate move from Iran it would be an admittance of failure which would be hard to countenance at this stage. 

Brent Crude failed to hold yesterday’s spike high but continues to trade in the region of the trend mean; in what has so far been a volatile consolidation following the short covering rally from the January low. A sustained move below $45 would signal a deeper process of consolidation is evolving. On the other hand, a sustained move to new recovery highs would likely be contingent on an event which restricts supply from conventional operations but that would encourage additional drilling from unconventional sources which highlights the obstacles to higher prices.  

The Dollar is now trading below the 200-day MA against the Russian Ruble and a sustained move above it will be required to signal a return to demand dominance. 

The Russian Traded Index hit a new recovery high today, having found support in the region of the 200-day MA during what has been a four-month range. A clear downward dynamic would be required to check potential for additional upside.