Moscow and Riyadh, backed by OPEC, are negotiating a deal that would allow them long-term control of oil prices. If successful, Russia and Saudi Arabia would manage oil markets for the next two decades.
At the moment, Russia and OPEC are signing agreements on oil production cuts on a yearly basis. However, the next deal could be much longer.
“We are looking for a very long-term cooperation between OPEC and non-OPEC producing countries,” OPEC Secretary General Mohammad Barkindo said on Wednesday.
Saudi Crown Prince Mohammed bin Salman announced the plan in an interview with Reuters on Monday. “We are working to shift from a year-to-year agreement to a 10-20 year agreement,” he told the news agency. “We have agreement on the big picture, but not yet on the detail.”
If such a deal is signed, it would be unprecedented. Russia and Saudi Arabia have worked together in previous oil crises, but such long agreements have never been reached.
“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, oil analyst at Panmure Gordon, told CNBC.
“I think getting to a fully-fledged agreement in which Russia becomes a de facto member is a bit of a push at the moment,” he added.
In December 2016, OPEC, Russia, and other major producers agreed to curb production by 1.8 million barrels per day (bpd) for six months. The agreement has been extended twice. In this period, oil prices have grown from $54 to above $70 per barrel and analysts have reported the supply overhang has almost been eliminated.
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