Saudi Arabia and Russia have forged a deal to use their combined market dominance to help stabilise the oil market as it recovers from its two year downturn.

The oil giants, which together contribute over 20pc to global supply, agreed on the sidelines of the G20 summit in China to form a ‘working group’ which will track the market’s recovery and make recommendations on how to ensure stability.

The pact did little to help steady the market on Monday morning as prices swung wildly – first spurred by hope that the pact would include a supply freeze deal before retreating after it emerged that the pact would not result in immediate action.

The price rallied from around $46.50 a barrel on Monday morning to just below $49.50 but quickly staggered back below $48 a barrel within minutes of a joint statement from Moscow and Riyadh which said the group’s first meeting would take place in October.

In a joint statement energy ministers Alexander Novak and Khalid al-Falih expressed a “mutual desire” to continue further co-operation within the energy sector.

Mr Novak said separately that the countries are discussing the details of a supply freeze deal ahead of an informal meeting of the Organisation of Petroleum Exporting Countries (Opec), together with Russia, later this month in Algeria.

“We consider a production freeze the most efficient tool, concrete parameters are being discussed at the moment,” Mr Novak said.

The talks between the two energy giants included the oil market’s pressing oversupply concerns as well as worries that the market rout is eroding investment in new production which could result in price volatility.

Saudi Arabia and Russia have also agreed to exchange information and experience regarding new technologies in the oil and gas sector, as well as in electricity generation and renewable energy.

The upcoming Opec talks will be the cartel’s second attempt to agree a deal to freeze supply since the oil market crash. In April this year negotiations fell apart over Iran’s refusal to curb its rising output following sanctions, but Russia is said to be in favour of an exemption for Iran until it reaches its pre-sanction oil production levels, which could pave the way for a supply freeze across the world’s largest producers.

A deal to control the supply of oil into the market would help to boost prices and ease the pressure on the economies of major oil suppliers which have taken a heavy toll following two years of weaker oil prices.

Market commentators have warned that the talks are likely to fall apart again, as they did at a meeting in Doha earlier this year.

“We’ve been here before,” said Mike van Dulken, at Accendo Markets.

“Remember earlier this year? Expect plenty of warm-up chat from everyone involved that moves the price of a barrel via hopes and fears, excitement and panic.

“Iran remains a potential spanner that could yet throw itself into the works. It’s between a rock and a hard place, needing to appear on-board with the talks whilst simultaneously insisting on having the right to further increase output post sanctions, all the while not wanting to dent prices for everyone. Not an easy balance to strike,” he added.