Russia shelves plans on permanent alliance with OPEC

Earlier this year, Russian energy minister Alexander Novak touted the idea that a new organization based on OPEC+ format – including OPEC members and allied oil suppliers led by Russia – will begin operations starting January 1, 2019 in an effort to boost the market. Back then, there were plans to choose a location for the headquarters and come up with a name for the structure.

The energy minister announced Moscow’s change of heart this week, saying that an official alliance would only create a new headache for all the players on the market. Instead, a special mechanism of cooperation will be set up that will allow members to convene, discuss and adopt memorandums or joint resolutions, according to Novak.

“There will be no formal organization like OPEC, as it is additional bureaucratic difficulties linked to the cartel, antitrust laws of countries, sanctions, contributions,” the minister said as cited by Russian media.

He added that the text of the charter regulating the cooperation between OPEC and non-OPEC states is almost ready and it has already been sent through the executive body of the organization, the OPEC Secretariat.

Despite attempts to regulate the market, it will still be facing an oversupply of up to 2 million barrels per day in the first two quarters of 2019, the minister warned.

The OPEC-Russia alliance to curb oil output in a bid to boost global crude prices has existed since 2016 and has been repeatedly extended since then. In December, OPEC and its allies agreed to cut crude output by 1.2 million barrels per day and later vowed to extend the cuts for another six months if necessary.

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