Super-OPEC Plan Fades as Russia Says Current System Works Well

(Bloomberg) -- Plans for the creation of a super-OPEC incorporating Russia into a new permanent group are fading as producers favor the simpler option of extending their current alliance again.

When the Organization of Petroleum Exporting Countries and its allies meet next week, their final agreement will probably refer to some kind of long-term cooperation, but no groundwork has been laid for anything more substantial such as the creation of a new secretariat, said two delegates, who asked not to be named because the information is private.

There are no discussions now about forming a permanent structure for a new group and the current system -- based on a six-month pact signed in December 2016 that’s twice been extended -- will continue, Russian Energy Minister Alexander Novak said in an interview with news service Tass published on Friday.

“Most likely, a document will be simply signed on the extension of interaction from 2019 for an indefinite period,” Novak said. “There is no need to further increase the bureaucratic apparatus” by creating a new secretariat, he said.

Russia isn’t a member of OPEC, but for the last two years it has led a group of countries from outside of the cartel that cooperated on production cuts to help end a global supply glut. The coalition, dubbed OPEC+, will expire at the end of this year unless ministers agree to extend it or replace it with a permanent alliance when they meet in Vienna next week.

The creation of a new grouping including Saudi Arabia, Russia and other major producers would mark a seismic shift in oil’s world order. It would control more than half global production and be a counterweight to the U.S. as the shale revolution transforms the country into a net energy exporter. The change might also have marginalized some historical oil powers whose capacity has recently been diminished, such as Iran or Venezuela.

A draft proposal for a long-term charter has seen little progress since it was sent to members in June, said the delegates. Some countries including Iran have voiced doubts about whether the new group would have meaningful powers, they said.

In the current alliance, policy has been dominated by the two largest members. Novak has formed a close working relationship with his Saudi counterpart Khalid Al-Falih, one that often seems to bypass OPEC’s traditional decision-making process. They often brief the media together outside the cycle of formal meetings.

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