Russia, Saudi Plot "Super-OPEC"

by Ship & Bunker News Team
Friday June 22, 2018

For decades, the oil world was defined as consisting of the Organization of the Petroleum Exporting Countries (OPEC) and the rest of the producing world, usually in competition with each other; but the recent alliance of Saudi Arabia and Russia will produce a third party that observers say could be a seismic shift in the oil market's future.

According to people with knowledge of the matter, both countries are planning to invite 24 countries to join a permanent body with its own constitution and secretariat, and which has been dubbed OPEC+.

The sources added that the new body would have a different structure to OPEC's one member, one vote system and that the Saudis and Russia, being major producers, might exert more influence than other members.

Bloomberg pointed out that a super-OPEC for the Saudis "would have the advantage of diminishing the influence of Iran, the kingdom's main rival in the Middle East," and it added that in the days leading up to OPEC's Friday Vienna summit, the Islamic republic repeatedly threatened to block the kingdom's plan to increase output, "something it can do under the current rules even if every other member of the group backs the proposal."

The only official statement that leads one to conclude that a so-called "Super OPEC" association could be formed was issued by Alexander Novak, energy minister for the Russians, who said in a speech on Wednesday, "we need to build upon our successful co-operation model and institutionalize its success through a broader and more permanent strategically focused framework."

While Bloomberg tentatively views this as "probably a snapshot of the oil market's future," another glimpse into a possible future - that of cooperation or at least a diminishing of hostility between Russia the U.S. - occurred on Friday, when a source told Reuters that Rick Perry, energy minister for the Americans, will meet Alexander next week in Washington at the World Gas Conference.

The meeting, which is said will consist of a discussion about oil markets, comes as John Bolton, national security adviser for the U.S., plans to visit Moscow next week to prepare for a possible meeting between U.S. president Donald Trump and Russian president Vladimir Putin.

Relations between the Saudis and the Russians have warmed for the past year, and earlier this month the two nations agreed to expand cooperation in the oil and gas sector and bolster investment in the energy sector, with the aim of shaping a global regulatory agenda.