Russia, Saudi Arabia to extend Opec+ oil pact: Putin

Comments open door for a deal at group’s meeting this week

Russia and Saudi Arabia agreed to extend into 2019 their agreement to manage the oil market — known as Opec+ — although Moscow and Riyadh have yet to agree on any fresh output cuts.

Russian President Vladimir Putin announced the extension after a meeting on Saturday, on the sidelines of the G20 summit, with Saudi Arabian Crown Prince Mohammad Bin Salman. The comments open the door for a deal at the Opec meeting this week in Vienna. Opec delegates said the leaders have given their political blessing for an agreement.

“There is no final decision on volumes, but together with Saudi Arabia we will do it,” Putin told reporters about extending the agreement in Buenos Aires. “We agreed that we will monitor the market situation and react to it quickly.”

Simultaneously, Saudi Arabia said through its state-owned press agency that Riyadh and Moscow had held talks in Buenos Aires about “rebalancing” the oil market. Neither the Russians nor Saudis made a formal declaration on output volumes. “This might be the critical breakthrough for Opec and non-Opec to cut,” said Derek Brower, a director at consultant RS Energy Group. “But the details are now what matter — how much will be cut, from when, for how long and, crucially, from what baselines.”

The unity Putin and the Saudi crown prince showed at the G20 meeting amid all the controversies shifted the momentum in favour of a new agreement, said Ildar Davletshin, an oil and gas analyst at Wood & Co. Financial Services.

“Their personal ties strengthened the probability of a new output-cut deal,” he said. “Russia now will most likely agree to a cut of 200,000+ barrels per day (bpd) from a relatively recent baseline.”

Proposed bpd cut from October levels to stem oversupply

Crude concerns

Earlier last week, an advisory group to Opec told ministers the market is oversupplied, with a need to cut about 1.3 million bpd from October levels. The proposals aren’t binding.

Opec, which pumps fourin-10 barrels produced worldwide, will convene in Vienna on December 6 to discuss output cuts after oil prices in November suffered the largest monthly drop since the global financial crisis in 2008.

For Mohammad Bin Salman, the dilemma between keeping the US — which wants cheaper crude — happy and having an oil price that balances the Saudi budget has been sharpened by the scandal of journalist Jamal Khashoggi’s killing.

Putin and the prince ended years of animosity between the world’s two largest oil exporters in 2016 and have worked together since then in a deal known as the Opec+ group, that includes the group plus non-Opec members such as Russia, Mexico, Azerbaijan and Kazakhstan.

Of 10 barrels worldwide pumped by Opec