London — Saudi Arabia and Russia said Thursday they will develop a "comprehensivebilateral agreement" on energy cooperation, suggesting that even if theOPEC/non-OPEC production-cut agreement falls apart, they will continue theirmarket-management efforts.
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* Countries pledge 'reliable and sufficient supply' * Alliance bonds two of world's top producers * Show of strength ahead of tricky OPEC meeting
In a statement issued after they met in Moscow, Saudi energy ministerKhalid al-Falih and his Russian counterpart Alexander Novak said theywould strive "for a balanced market that is supported by a reliable andsufficient supply."
Their efforts were endorsed by Saudi Crown Prince Mohammed bin Salman andRussian President Vladimir Putin, who also met earlier Thursday ahead ofthe 2018 World Cup's opening match between the two nations.
"Without a doubt, we would like to continue this cooperation and moveforward," Salman said during the meeting with Putin, according to aKremlin transcript. "Today we have a very historic OPEC+ agreement inplace, OPEC and non-OPEC countries are working together."
Putin also praised the burgeoning political and economic ties between thetwo countries and endorsed the crown prince's call for greater cooperation on energy issues.
"We will continue working together in the most important area for us,"Putin said.
Warming ties between Saudi Arabia and Russia -- two of the world's topthree oil producers -- have been a game changer in the market, leading tothe 1.8 million b/d production cut agreement sealed in late 2016 to eliminate a global inventory overhang.
OPEC is set to meet June 22 in Vienna to decide the future of the deal,with non-OPEC partners, including Russia, joining the meeting a day later.
Saudi Arabia and Russia have been keen to pump more barrels to moderateoil prices and prevent a supply gap resulting from continued productiondeclines in Venezuela and the potential impact of US sanctions on Iran,which snap back November 5.
Novak said earlier Thursday that the OPEC/non-OPEC coalition couldconsider raising production as much as 1.5 million b/d.
But price hawks Iran, Iraq and Venezuela have vehemently said theyare opposed to any attempts to modify the output deal, setting up a weekof potentially difficult negotiations.
"Fundamentals at these prices show that we don't need extra barrels inthe market," Iran's OPEC Governor, Hossein Kazempour Ardebili, told S&PGlobal Platts Thursday in an interview.
OPEC, as a whole, produced 31.90 million b/d in May, according to thelatest Platts OPEC survey, some 840,000 b/d below its collective ceilingof about 32.74 million b/d, when every country's quota under the production agreement is added up. BOOSTING INVESTMENT
OPEC and Russian officials have long discussed extending theircooperation beyond the terms of the production-cut deal, but have notspecified what such an agreement may entail.
Prior to signaling its desire to increase output in the short term, SaudiArabia had declared that the cuts might need to continue into 2019 tobolster prices and encourage upstream investment.
Novak and Falih, in their joint statement, said they would seek to"support investment in the oil and gas sector to meet the growing demandfor oil and compensate for natural decline in production."
And they said they would work with all members of the OPEC/non-OPECagreement, as well as other major producers, to create a "long-termstructure for interaction."
Novak and Falih credited the production-cut deal for leading "to thestabilization of the oil market."
"Given the importance of continuing this process to ensure the well-beingand growth of the world economy, the Kingdom of Saudi Arabia and the RussianFederation agreed to take the next step toward expanding cooperation in theenergy sector, especially in the oil and gas sector," the statement said. -- Herman Wang, firstname.lastname@example.org
-- Rosemary Griffin, email@example.com
-- Edited by Keiron Greenhalgh, firstname.lastname@example.org