Saudi Arabia and Russia could formalize a strategic partnership that would last indefinitely, potentially marking a new era for the oil market.
In a wide-ranging interview with TASS, Saudi oil minister Khalid al-Falih said that he hopes to setup an official OPEC+ governing body, including a Secretariat, likely to be based in Vienna. The proposal could be finished by December.
To date, OPEC+ has been a somewhat informal group, or at least a provisional one, intended to address the supply glut that emerged following the 2014-2016 market bust.
This past June, the group all but declared mission accomplished, watering down the production targets by agreeing to a vague increase in collective production by 1 million barrels per day (mb/d). Without the urgent need to balance the market, the purpose of the OPEC+ agreement following the June meeting already started to become unclear.
Al-Falih wants to put together an official governing structure that would preside over oil market coordination going forward. “[W]e 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. He said that the purpose of OPEC+ would not be aimed at a fixed production target, but to coordinate production levels as they see fit.
But, of course, this has always been the mission of OPEC. The objective of establishing a permanent OPEC+ body raises the question of what is supposed to happen to OPEC. Al-Falih suggests that OPEC+ could “work closely with OPEC.” It seems confusing, since all of the OPEC members are in OPEC+, while OPEC+ contains a bunch of additional countries. How will these two bodies interact and to what degree will they overlap? That much remains unclear.
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