Last week, Saudi Arabia and Russia caused a spike in oil prices at the G20 summit. Oil ministers from the two countries met privately on the sidelines of the meeting to discuss stabilizing the oil market, which is ironic considering what happened next.

At around 8:00 AM GMT they announced (through a PR agency) that they would be making an announcement later that morning at 9:30 AM GMT. The price of oil began spiking (rising up to 4% higher) presumably because speculators thought an oil production freeze announcement would be forthcoming. However, the actual announcement contained nothing of the sort, and prices immediately fell.

Well-informed traders caught the rise by buying when news of the announcement-of-the-announcement came out. They knew an oil production freeze would not be forthcoming and sold just before the actual announcement and subsequent price drop.

The IEF & the Oil Market

We can expect more spikes like this over the next few weeks as the International Energy Forum (IEF) approaches. Although the meeting (which will be held in Algeria on September 26-28) is not an official OPEC meeting, all OPEC members will be there and plan to hold talks on the sidelines.

In the meantime, the new OPEC Secretary General, Mohammad Barkindo, has been meeting with various OPEC members in small groups. Last Tuesday, he met with the Iranians and on Friday will meet with Saudi Arabia and Algeria in Paris.

Likelihood of an Oil Freeze Deal

Despite positive sentiment from some OPEC members, like Algeria, it is a long shot that we will see any kind of freeze agreement between OPEC members or between OPEC and Russia. Several OPEC countries are desperate for oil prices to rise, so they say hopeful things—but this is just hope, not realism. For example, when Algeria’s oil minister said last week that, “All solutions are possible,” he was trying to put the most positive spin he could on the current situation, because Algeria would benefit from a production freeze. He might also have hoped that positive comments from him and his colleagues could create a short time price spike in the oil market, as often happens.

Larger and more secure producers, like Saudi Arabia and Russia, remain guarded in their language. Russian oil minister Alexander Novak recently said that he sees no reason for an oil production freeze if prices remain around $50. Yet, he is still planning to meet with his Saudi counterpart at the IEF to discuss market stabilization and other methods of cooperation.

Volatility Will Continue

Whether or not we see any agreement on oil production in the coming weeks, volatility in the oil market is high and short-term traders should keep an eye on the various meetings and announcements (or announcements-of-announcements) that could produce significant price spikes or troughs in the oil market in the coming weeks.