Almost a month has passed after the announcement of the deal between Russia and Saudi Arabia to freeze crude oil output at January levels in order to battle the ongoing supply glut and the continuous price decline. The deal was backed by Saudi Arabia�s fellow OPEC members: Qatar and Venezuela and eventually Nigeria. Now it seems, as phase 2 is about to begin as the Organizations of Petroleum Exporting Countries is due to meet its non-member counterparts for more talks on March 20th in Moscow.

As oil prices fell over the period of 19 months, the Saudis were keen on keeping their production high in order to push the more costly Russian and US shale producers out of the market. But now the self-proclaimed OPEC leader is starting to get a taste of its own medicine as the country struggles to plug a record budget deficit of almost $100 billion by rethinking its subsidies and welfare policies and seeking a bank loan of $6 to $8 billion.

US shale oil producers implemented serious spending cuts earlier this year. Russia�s economy, heavily dependent on oil and natural gas exports, took a blow from the dropping prices and was further hit by US and EU sanctions, imposed in 2014 in response to the Russian occupation of Ukraine�s Crimean peninsula. The impact was cushioned somewhat due to the ruble falling more than 40%.

Crude oil prices have risen from their lowest point in 12-years this week in response to Iran�s post-sanction recovery happening slower than what was initially announced. The country that disparaged February�s output freeze deal as �ridiculous� now seems willing to take its seat at the negotiation table.

While the market remains oversupplied and even the low-cost producers are starting to bleed, common sense dictates that it is in everyone�s best interest to commit to tangible production cuts in order to keep oil prices from taking a turn for the worse again. However, tension is still high around the negotiation table and with every participant looking out for his own interest, anything can be expected from the meeting next Sunday.

15 countries have already been confirmed to participate in the meeting, among them representatives from Russia, Saudi Arabia, Venezuela, Iran and Nigeria, will be present.
�This article was written �by�Donald Levit �for Economic Calendar.com on March 12,2016.