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Talks by Russia's Putin and Saudi prince could be big deal for oil market

Prince Mohammed bin Salman, Saudi Arabia's defense minister (L) talks to Russian President Vladimir Putin (R) during a meeting in the Konstantin Palace in Saint Petersburg, Russia, June,18, 2015.
Sasha Mordovets | Getty Images

Russian President Vladimir Putin's seemingly cozy talks with Saudi Arabia could put a floor under oil prices, possibly limiting what could have been a sharp drop later this month.

In a surprise move over the long Labor Day weekend, Russia and Saudi Arabia agreed to cooperate in world oil markets. There was no immediate deal to act but they say they are moving toward a strategic energy partnership and could take action in the future. The joint statement was signed by both countries' oil ministers on the sidelines of the G-20 summit in China, after a meeting between Putin and Saudi Deputy Crown Prince Mohammed bin Salman.

While skepticism swirled that the world's two biggest oil producers would actually strike a deal, the fact they are talking and publicly seeking to cooperate is a big step. The crude market was surprised by the announcement that came out of the G-20, because it had not been prepared for anything but chatter ahead of a meeting between OPEC and non-cartel producers in Algeria at the end of the month.