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OPEC is looking to forge a “very long-term” cooperation with non-OPEC producers, the cartel’s Secretary General Mohammad Barkindo said on Wednesday, lending further credence to the news that Saudi Arabia is working on an oil cooperation deal with Russia-led non-OPEC producers that could span two decades.
“We are looking for a very long-term cooperation between OPEC and non-OPEC producing countries,” OPEC’s Barkindo said at an energy conference in Baghdad today.
Earlier this week, Saudi Crown Prince Mohammed bin Salman said that OPEC and Russia were looking to solidify their cooperation on crude oil production for another decade or two.
Barkindo’s words of “very long-term cooperation” suggest that OPEC would welcome such a deal that would be unprecedented in the oil market.
In the current production cut deal—as well as in previous such joint efforts in the past—OPEC and Russia agreed to cooperate for a strict and usually short period of time, typically a year or two.
Analysts believe that OPEC would like very much support a possible unparalleled deal spanning up to 20 years, and that the Saudi-Russia ‘bromance’ will continue.
“I think it’s certainly something that OPEC would like very much … And I think the agreement that they struck — that is with OPEC and non-OPEC members — actually took them quite a large step towards that,” Colin Smith, an oil analyst with Panmure Gordon, told CNBC on Wednesday.
Related: OPEC Scrambles To Justify Output Cuts
Still, a deal in which Russia could become a de facto OPEC member “is a bit of a push at the moment,” Smith noted.
Russia sees no reason to join OPEC, but the need to continue the OPEC/non-OPEC cooperation in some form after the production cuts end is obvious, Russia’s first deputy minister of energy Aleksey Texler said earlier this month.
Commenting on the possible decades-long partnership, Stephen Brennock, an oil analyst at PVM Oil Associates, told CNBC in an email:
“While we wait to see if an unparalleled decades-long agreement between so many producers can be achieved, one thing seems certain — there is no expire date in sight for the Saudi-Russia romance.”
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
OPEC members are already benefiting from the OPEC/non-OPEC production cut agreement in terms of higher oil prices and therefore more oil revenues. Russia and Saudi Arabia were the architects of this successful cooperation. That is why OPEC members would welcome a long-term cooperation between them and Russia with the aim of ensuring that the global oil market never faces another glut in the future from which OPEC members and Russia have suffered very badly since 2014.
For Saudi Arabia, a long-term cooperation with Russia has the added bonus of a geopolitical benefit. Rather than depending totally on a uni-polar power, namely, the United States , Saudi Arabia realizes that the balance of power in the world is undergoing great strategic shift and has therefore come to realize that its strategic interests could better be served with a tri-polar powers, namely the US, Russia and China, particularly after the successful launch of China’s crude oil futures contract.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London