Oil in Global Economy Series: Russia & Saudi Arabia looking for 10-20 years oil supply alliance

Saudi Arabia’s powerful crown Prince Mohammad bin-Salman has confirmed the commentaries coming from Organization of Petroleum Exporting Countries (OPEC) that Saudi Arabia and Russia is looking to forge a long-term oil supply alliance that began with the OPEC/N-OPEC agreement of November 2016. OPEC had reported that working groups are evaluating the possibility of creating an oil-super-group with Saudi Arabia as the de-facto leader of the OPEC countries and Russia as the leader of Non-OPEC countries.

What surprised everyone is the fact that the Crown Prince isn’t looking for a few years alliance but for several decades. It is not clear at the point how the cartel might operate in the long run but a supergroup alliance which produces more than half of global production would have the ability to have significant influence over the price of oil. The comments were made by the Crown Prince in an interview with Reuters on Monday.

The current cooperation between world’s two largest producers along with other has helped the price of Brent to recover from below $30 per barrel to above $70 per barrel. However, the price increase came with an associated cost. The higher price has also helped U.S. producers to recover and increase production by several million barrels per day, while OPEC and participating N-OPEC countries maintained a production ceiling.