OPEC Countries Push to Formalize Deal with Russia

Saudi Arabia and the United Arab Emirates (UAE) are trying to lock in Russia and other non-OPEC allies into several years of co-operation for managing the oil market, according to The Wall Street Journal.

The prospect of another price crash is likely pushing the cartel and its allies to agree on some sort of arrangement. The proposal, however, is facing opposition from Iran, which fears domination by Moscow and Riyadh, the report says.

The so-called OPEC+ coalition reached a historic deal in 2016 to slash output in a bid to end a punishing oil price downturn. The group of two dozen producers briefly lifted the caps last year, but agreed to fresh production cuts in December after a three-month collapse in oil prices.

OPEC Secretary General Mohammed Barkindo and some oil ministers have long sought to make the alliance permanent, but Russia essentially nixed that idea in December.

Now, some OPEC nations including Saudi Arabia and the United Arab Emirates are trying to lock their allies into another several years of coordination, the Wall Street Journal reports. Some of the nations are expected to debate the proposal when they meet in Vienna later this month, according to the Journal.

“It is an effort to put a formal framework around an ad hoc relationship,” Helima Croft, global head of commodities strategy at RBC Capital Markets, told CNBC. She said OPEC clearly does not want Russia to abandon them.

One OPEC official told the Wall Street Journal that a vow to continue cooperation would support oil markets because it would reassure traders the OPEC+ backstop would remain in place.