When the group overseeing the so-called OPEC+ deal met last night, proceedings were dominated by two nations: Saudi Arabia and Russia. It was probably a snapshot of the oil market’s future.

Beyond the drama of this week’s diplomatic efforts to agree to an increase in oil production, the more significant longer-term development may be moves to make Russia’s role in managing global supply permanent, bringing together the two largest oil exporters.

Russia isn’t a member of oil carte Opec, but for the last two years has led a group of countries outside the group lending support to the cartel, creating a coalition of 24 producers that’s been dubbed OPEC+.

Russian oil minister Alexander Novak said in a speech on Thursday that "we need to build upon our successful co-operation model and institutionalise its success through a broader and more permanent strategically focused framework". His Saudi counterpart, Khalid al-Falih, echoed those comments and Opec president Suhail al-Mazrouei said on Friday that a charter for the enlarged group had been circulated with a view to an agreement by the end of the year.

The countries are considering inviting all 24 countries to join a permanent body with its own constitution and secretariat, according to people familiar with the matter, asking not to be identified because the discussions are private. It would mark a seismic shift in oil’s world order and while it probably won’t supplant Opec in the short term, it would create a rival for the organisation that’s sought to manage supply for six decades.

It’s possible the new body would have a different structure to Opec’s principle of one member, one vote. Larger producers, such as Saudi Arabia and Russia, might be given more weight in the new body, the people said.

Tactic or strategy?

The wider group risks turning into little more than a talking shop, not least because, unlike Opec, Russia has traditionally seen supply management as a tactic rather than a strategy, to be deployed in cases of extreme market imbalance.

In 2008, Russia helped found the Gas Exporting Countries Forum, something many expected to become an Opec-style organisation for the global gas market. Despite having a permanent secretariat and annual meetings, it’s had little impact on supply.

The so-called Super-Opec grouping might merely formalise current relationships. Falih and Novak have formed a close working relationship over the past two years, one that often seems to bypass Opec’s more traditional decision-making process. They often brief the media together on policy, outside the cycle of formal meetings.

Saudi Arabia and Russia together pump about 21-million barrels per day (bpd) — or one fifth of global supply. Without Saudi Arabia, the rest of Opec produces about 20-million barrels, according to International Energy Agency (EIA) data.

For Saudi Arabia, the new group would have the advantage of diminishing the influence of Iran, the kingdom’s main rival in the Middle East. At this week’s meeting, Iran had threatened to block Saudi Arabia’s plan to increase output, something it could do under the current rules even if every other member of the group backed the proposal. (Bloomberg)

Update news