OPEC and its non-OPEC partners are set to officially sign a cooperation agreement in March of next year, the UAE’s energy minister Suhail al-Mazrouei said, according to Reuters.
The agreement will be officially signed in March in Saudi Arabia, the oil minister said, and will seek to align OPEC with non-OPEC oil producers, most importantly Russia, on matters likely to include achieving market balance—specifically production quotas. The term “market balance” is the new phrase OPEC is using instead of referencing specific oil prices, after OPEC in October steered its members away from any words that may put it at odds with proposed U.S. legislation called the NOPEC Act.
OPEC and a group of non-OPEC members reached an agreement on Friday to cut production starting in January 2019. OPEC’s portion of the production cuts was 800,000 bpd, with Saudi Arabia’s accounting for 500,000 bpd of that. The non-OPEC countries agreed to 400,000 bpd of the production cut, with Russia accounting for approximately 230,000 bpd of the 400,000.
Russia, for its part, said it would take “months” for that level of cut to be achieved. Likewise, OPEC’s production cuts are unlikely to shrink by 800,000 bpd immediately on January 1st, and will more than likely take months as well.
Oil prices ticked upward on Friday, but failed to stay up on Monday, even as OPEC member Libya, exempt from the most recent production cut deal, declared a force majeure on Monday as protests hit the nation’s beleaguered oil industry, shutting in production of its biggest oilfield, Sharara.
The idea of making an OPEC/non-OPEC alliance official has been bandied about for some time, most recently by Khalid al-Falih, who said in late October that he hoped to set up an official OPEC+ governing body to preside over oil market coordination.
“…we want to sign a new cooperation agreement that is open-ended. That does not expire after 2020 or 2021. We will leave it open,” Al-Falih told TASS at the time, adding that Russia would likely assume the leadership role in this endeavor.
By Julianne Geiger for Oilprice.com
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