OPEC heavyweight Saudi Arabia, led by Crown Prince Mohammed bin Salman, is in talks with Russia to extend their production output cap deal that could last up to 20 years, according to a report by Reuters.
OPEC deal has helped boost oil prices to about $70/barrel from below $30 in 2016
Mohammad Barkindo, Secretary General of OPEC, says the cartel is looking to establish a “very long term” cooperation with other crude exporters to manage oil supplies.
Barkindo made the comments Wednesday after Reuters reported earlier in the week that Saudi Arabia and Russia were discussing a long-term pact aimed at controlling exports amongst participants for possibly the next 20 years.
Since the beginning of 2017, 14 members of the cartel along with Russia, Azerbaijan, Kingdom of Bahrain, Brunei Darussalam, Kazakhstan, Malaysia, Mexico, Sultanate of Oman, Republic of Sudan, Republic of South Sudan have participated in the OPEC supply cut agreement.
So far, the move has helped boost prices from 2016 lows of below $30/barrel to almost $70/barrel today. The agreement was originally supposed to run from January 2017 to June 2017, but has been extended twice by participants and is currently set to expire in December 2018.
Despite the deal’s deadline, Barkindo told an energy conference in Baghdad that “we are looking for a very long-term cooperation between OPEC and non-OPEC producing countries.”
An agreement amongst cartel members and outside producers lasting between 10 and 20 years to rein in global supplies and help stabilize oil prices would be unprecedented.
And Barkindo says more oil producing nations have shown interest in participating in the cartel’s pact.
“In addition to the 24 countries that came to sign the declaration of cooperation in November, we have six more producing countries who came to show solidarity,” he said.
Iraq’s Oil Minister Jabar al-Luaibi told the Baghdad conference that a number of oil exporters have shown interest in extending OPEC’s agreement for a further six months.
Al-Luaibi says the global crude market is stabilizing and prices have improved. He argues a decision to extend the cuts beyond this year will depend on the outcome of meetings involving pact participants later this year.
According to Reuters, Barkindo says OPEC is also evaluating the impact of the deal and is working on determining the “appropriate action” to be taken when it expires.