Russia’s Energy Minister Alexander Novak
Russia’s Energy Minister Alexander Novak, Venezuela’s Oil Minister Manuel Quevedo, Opec Secretary-General Mohammad Barkindo and Saudi Minister Khalid Al Falih during the beginning of an Opec and Non-Opec meeting in Vienna, Austria, on Tuesday. Image Credit: Reuters

Abu Dhabi: The 14-member Opec bloc on Tuesday formally signed a long-term pact with Russia and other oil producers to boost cooperation in stabilising oil markets and support prices.

The latest development comes amid dampening demand for oil prices and rising crude oil inventories especially from the United States, underscoring the importance of a long-term cooperation among major oil producers.

“The new charter of cooperation helps us to meet on a regular basis and monitor the market. We will be successful in ensuring a stable market in future,” Russia’s energy minister Alexander Novak said while addressing Opec conference delegates in Vienna on Tuesday.

Saudi Arabia’s energy minister Khalid Al Falih also highlighted the importance of a long-term relationship with non-Opec member countries during his speech in Vienna.

“The market volatility will not disappear and complex and rapidly changing dynamics are here to stay. This highlights the need for an institutional framework to pragmatically intervene when required,” he said.

“But to be effective, such a framework must be sufficiently flexible and include more producer power than Opec alone can provide. That is the important of attracting and retaining our non-Opec colleagues to continue working under the new charter. That is where the long term Opec+ partnership is vital for the stability of oil markets.”

Russia and Opec member countries are already cooperating since 2017 in adjusting oil production to stabilise oil markets. The new charter of cooperation is expected to further cement their relationship and help both Opec and non-Opec members to closely monitor oil markets and take necessary action when required in balancing oil markets.

Meanwhile, the meeting between Opec and its allies ended in Vienna on Tuesday with global oil producers agreeing to extend oil production cuts until the end of March in 2020.

“In view of the underlying large uncertainties and its potential implications on the global oil market, the 6th Opec and non-Opec Ministerial Meeting hereby decided to extend the decision taken on voluntary production adjustments at the 5th Opec and non-Opec Ministerial Meeting on December 7, 2018, for an additional period of nine months from July 1, 2019 to March 31, 2020,” a statement issued by Opec secretariat said.

“The Joint Ministerial Monitoring Committee [JMMC] was requested to vigilantly monitor the fair implementation of the above mentioned resolution, in light of the supply and demand balance and the prevailing uncertainties, and report back to the meeting.”

Oil prices fall on demand worries

Oil prices fell on Tuesday on demand worries due to trade tensions between the US and China.

Brent was trading at $64.42 (Dh236.5) per barrel, down by 1 per cent at 5.14pm UAE time with West Texas Intermediate at $58.36 per barrel, down by more than 1.24 per cent.

“The extension of the Opec+ supply pact has long been baked into sentiment hence the muted price reaction. Moreover, as much as it may seem like a victory for the Opec alliance, their decision to maintain supply curbs reaffirms that the oil market remains oversupplied and has yet to reach a balance,” said Stephen Brennock, oil analyst from London based brokerage firm PVM oil Associates.

However, he said Opec-led cuts are more likely to put a floor under prices rather than breathing fresh life into upward buying pressures.

“It is therefore of my opinion that barring a geopolitical supply shock, upside potential will be in short supply for the remainder of the year.”