Russia to establish new OPEC

Russia to establish new OPEC

New OPEC-Russia organisation may start its work on 1 January 2019, Russian energy Minister Alexander Novak said today.

The minister specified that it will retain the functions of regulating oil production and will be able to cut it again, if necessary.

"We plan to start this mechanism on January 1, 2019. We will discuss it at a ministerial meeting," TASS cited Novak as saying. He added that the options for the name of the new organization's name have yet to be chosen, as well as the location of the headquarters.

According to the head of the Ministry of Energy, he does not expect the overproduction of oil in the foreseeable future, despite the recent decision by OPEC + to increase production by 1 million barrels per day. "On the contrary, the market is rebalancing, a deficit can be expected," Novak predicts.

A leading analyst of the National Energy Security Fund, a lecturer at the Financial University under the Government of the Russian Federation, Igor Yushkov, speaking to Vestnik Kavkaza, noted that the format of Russia's cooperation with OPEC is likely to remain at the current coordination level. "It is rather difficult to imagine any new format, since Russia has been de facto a member of OPEC for more than a year - we have been committed to the volumes of production, execute them, we constantly meet with OPEC members and discuss the situation on the market, monitor the effectiveness of regulation volumes of oil output," he recalled.

"Therefore, it is difficult to imagine a more close interaction than the current one. So,the format is likely to remain the same, but an agreement may be signed that Russia is a permanent partner of OPEC. According to the rules, we cannot be an OPEC member, as it has mechanisms when the state determines the level of oil production. Without it we cannot become an OPEC member, but we can get a partner status," Igor Yushkov pointed out.

"OPEC and Russia will benefit equally from such cooperation and a constant information campaign around it with regular statements that we jointly monitor the market and an acceptable level of prices. We have already seen how prices have risen to $80 per barrel, now they have gone down to $70, but this corridor is comfortable for everyone. Of course, we remain competitors on the international market - Russia, Saudi Arabia and Iran - we should not forget about it. We cooperate on local issues, but we compete in other things," the leading analyst of the National Energy Security Fund said.

A senior analyst of 'Uralsib Capital', Alexei Kokin, also expects that cooperation in the new format will remain at the level of coordination of output. "The only thing that is worth noting is that OPEC will be attacked by US lawmakers now, who would like to extend antitrust laws to international organizations. It could push the leading OPEC producers, especially Saudi Arabia, to informal cooperation with Russia," he predicts.

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