OPEC backs 10- to 20-year oil deal between Saudi and Russia

by WorldTribune Staff, March 29, 2018

A deal between Saudi Arabia and Russia that could extend the two nations’ control over crude oil supplies for the next two decades has OPEC’s blessing.

Saudi Crown Prince Mohammed Bin Salman with Russian President Vladimir Putin. / Reuters

Saudi Crown Prince Mohammed Bin Salman told Reuters earlier this week: “We are working to shift from a year-to-year agreement to a 10-20 year agreement” on oil curbs with Russia. “We have an agreement on the big picture but not yet on the details.”

“It is a very important strategic development,” Helima Croft at RBC Capital Markets said of the Saudi-Russia oil collaboration.

“The Crown Prince is making the statement, not the oil minister, one more clear sign that he (like Putin) is the final word on his country’s oil policy.”

OPEC, which said it would like a deal with Russia “very much,” is working on a “very long-term” deal to try to extend its alliance with other oil producers, Secretary General Mohammad Barkindo said at an energy conference in Baghdad on March 28.

Russia is not a member of OPEC but has worked alongside the 14-member group during previous oil surpluses.

“Saudi Arabia recruited Russia and other non-OPEC countries to help drain oversupply when oil prices collapsed to below $30 a barrel in 2016 from over $100 in 2014,” the Reuters report said.

Crude has since recovered to $70 but output from U.S. shale producers has capped prices.

“This is all about whether the arrangement is a short-term expedient to deal with this particular crisis in the oil market, or whether it reflects a realignment in world oil,” said oil historian Daniel Yergin, vice chairman at consultancy IHS Markit. “OPEC countries want to find a way to institutionalize this relationship rather than to have it be a one-shot deal.”

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