Plans of the Organization of the Petroleum Exporting Countries (OPEC) and other supplies, especially Russia, to possibly continue curbing oil production for the rest of 2018 and potentially into 2019 gave a boost to oil prices.

“It’s all about sending a signal to the oil markets that if necessary this now OPEC Plus deal could be extended indefinitely,” Alexei Kokin, a senior oil and gas analyst at UralSib Financial Corp in Moscow, told New Europe by phone March 30.

He noted that Riyadh is trying to convey the impression that Saudi Arabia and Russia are the largest members of the OPEC, non-OPEC deal who would keep the agreement in place for much longer than 2018 or even 2019. “This could be an ongoing sort of revolving arrangement. If it’s kept in place for a long time then presumably it won’t be on the same terms and there would be periodic revisions just like OPEC revises its quotas,” Kokin said.

The UralSib oil and gas analyst said he doesn’t think that extending the OPEC/non-OPEC production cut deal would have much of an impact on oil prices right now. “It would just give the market some idea what to expect,” Kokin said.

According to Reuters, US WTI crude futures CLc1 were at $64.63 a barrel on March 29 while Brent crude futures were at $69.76 per barrel.

Traders are concerned, however, with increasing US oil production and the further expansion of US crude oil stocks. OPEC and non-OPEC producers led by Russia started cutting output last year to stave off oversupply and boost prices.

Brent has risen by around a quarter since then.

Reuters quoted sources this week as saying the cartel and its allies were set to keep their deal on cutting production for the rest of 2018.

Bloomberg has since quoted Iraq’s Oil Minister Jabbar al-Luaibi who told reporters at an energy conference in Baghdad that some OPEC and non-OPEC producers have suggested extending global output cuts beyond 2018 and up to the middle of next year.

OPEC is looking for a long-term cooperation with other global producers, OPEC Secretary-General Mohammad Barkindo said at the same conference.

OPEC kingpin Saudi Arabia has signaled that it wants to continue its cooperation with Russia. Bloomberg quoted Saudi Energy Minister Khalid Al-Falih as saying that the countries won’t stop collaborating once the market is in balance and that their joint efforts may include production cuts.

The potential extension of the deal was announced during Saudi Crown Prince Mohammed bin Salman’s recent tour of the United States. The Crown Prince told Reuters that Riyadh and non-OPEC producer Russia were considering extending an alliance on oil curbs that began in January 2017 after oil prices crashed. “We are working to shift from a year-to-year agreement to a 10-20 year agreement,” he told Reuters in interview in New York. “We have agreement on the big picture, but not yet on the detail.”

King Salman became the first Saudi monarch in history to visit Russia in October 2017. During his visit, he oversaw the signing of several bilateral energy agreements.

Kokin told New Europe on March 30 that the Russian government acknowledges the usefulness and the benefit of the OPEC/non-OPEC deal. “It’s obviously getting much higher prices; it’s getting much better taxes, much higher revenues from this deal. It’s best having $65 or $70 (per barrel) rather than $40,” he said.

Kokin noted, however, that Russian companies have their own production plans and they might not like the current oil production levels.

“There might be some tension between basically the idea that this deal should be kept and the Russian oil sector in general which is perhaps more aggressive in its output plans,” Kokin said. “But I don’t think it will be such an enormous bone of contention because my guess is that Russia can’t really increase output that much just because from that base you don’t really go up 5 percent per year for several years. It doesn’t work. We’re talking about relatively small amounts,” the UralSib analyst said. “We’re talking about changes of maybe half a million barrels and that’s kind of the maximum,” he said, adding that in a few years an increase of that would be realistic because demand is also growing.

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