The Saudi and Russian oil ministers are meeting — and crude oil is ripping higher

Saudi Arabia, along with Russia, Qatar and Venezuela have agreed to freeze oil production, dashing oil bulls’ hopes of a cut.

Twitter has been ablaze with oil-talk on Tuesday, after the countries met in secret this morning.

And here’s what that did to the market, which was expecting a cut:

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It doesn’t take too much to move the price of oil these days.

The commodity was up over 5% on a report in the Financial Times that the Saudi Arabian oil chief, Ali al-Naimi, is meeting with counterparts from Russia, Qatar, and Venezuela. It’s fallen back down to a rise of just over 2% as of 9:20 a.m. UK time.

The FT’s Anjli Raval and David Sheppard don’t give the agenda of the meeting but markets took it as a sign that a production cut might be being discussed behind closed doors.

There have been increasing calls from OPEC members to cut production and raise prices from countries such as Nigeria and Venezuela.

Here’s what that did to the crude oil price overnight:

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The meeting exposed the divisions within OPEC, the oil-producing cartel.

Saudi Arabia, perhaps the most powerful OPEC member, wants to continue with a strategy of oversupply to drive down prices. The aim is to undercut the profitability of the US shale oil industry.

But a production cut, and higher prices, would benefit other members, such as Venezuela and Russia, who have higher oil production costs. The meeting comes a day after the first Iranian oil exports hit Europe, which will put further downward pressure on prices.

Saudi Arabia won’t be easy to sway on any cuts now or in the future.

But, as BI’s Elena Holodny reported last month, ties between Russia and Saudi Arabia have been strengthening since the US lifted restrictions on Iran, which could smooth the way towards a production cut.

Chief among them:

• Russia’s president Vladimir Putin recently held a series of bilateral meetings with the de-facto leader of Saudi Arabia, the Deputy Crown Prince Mohammad bin Salman, regarding security and economic issues.
• Putin and Mohammad bin Salaman signed a $10 billion economic agreement last year.
• The Saudis expressed interest in buying Russian weapons.
• And even though the Saudis and the Russians are on opposite sides of the Syrian conflict, there were some reports that Putin might be open to Syrian President Assad’s stepping down. (Some experts are skeptical that this is true.)

As Holodny reports, RBC Capital Markets’ global head of commodity strategy Helima Croft said: “Hence, we believe that there is an existing dialogue channel that could be used to coordinate joint action.”