It is highly unlikely that OPEC and other oil producers would set up a joint structure due to the additional red tape it would create as well as the risk of US monopoly-related sanctions, Russian Energy Minister Alexander Novak said on Thursday.

The Organisation of the Petroleum Exporting Countries (OPEC) and other top oil producers led by Russia have since the end of 2016 made an unprecedented joint effort to curb output and support prices. OPEC and Russia jointly produce more than 40 per cent of the world's oil.

Russia's energy ministry had said that Moscow and OPEC lynchpin Saudi Arabia had reached a general agreement that the OPEC+ format should be “institutionalised” and extended until 2019 and beyond to monitor the market and take joint action if needed. However, Novak said such an idea has been ditched.

“There is a consensus that there will be no such organisation. That's because it requires additional bureaucratic brouhaha in relation to financing, cartel, with the US side,” Novak told a briefing to reporters. “I think, non-OPEC (countries) will not agree as they don't want to be hit by sanctions.”

Proposed US legislation known as “NOPEC” could open OPEC up to anti-trust lawsuits but has long laid dormant, with previous US presidents signalling that they would veto any move to make it law. However, US President Donald Trump has been a vocal critic of OPEC, blaming it for high oil prices and urging it to increase output.

“This won't be an organisation, this is some mechanism of cooperation: to convene, to discuss, adopt some memorandums, joint resolutions,” Novak said about future cooperation with OPEC.

Price volatility

Rising protectionism and trade wars and the unpredictability of the US administration have greatly contributed to global oil price volatility over the past two years, Novak said.

Oil prices have been volatile, falling by more than a third this quarter.“All these uncertainties, which are now on the market: how China will behave, how India will behave... trade wars and unpredictability on the part of the US administration... those are defining factors for price volatility,” Novak said.

He said that the US decision to allow some countries to trade Iranian oil after putting Tehran under sanctions was one of the key factors behind this month's global pact to cut oil output by 1.2 million barrels per day.

The OPEC and other top oil producers led by Russia have agreed to cut their output beginning in January in order to prop up oil prices. “Had it been hard sanctions against Iran, we wouldn't have done it (reduce output),” Novak told reporters.

He also said that Russia would cut its output by between 3 and 5 million tonnes in the first half of 2019 as part of the deal and then it would be able to restore it to 556 million tonnes.

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