'Positive contact' with Saudi Arabia will continue beyond OPEC deal, Russia's energy minister says

  • Russia and Saudi Arabia are leading a joint OPEC and non-OPEC effort to try and reduce a global supply overhang and prop up prices.
  • The production cuts are scheduled to last throughout 2018.
  • While the two countries appear poised to work together to support the energy market next year, Russia's Alexander Novak said cooperation would likely transcend into other areas too.

Russia and Saudi Arabia will look to bolster bilateral ties beyond 2018, Russian Energy Minister Alexander Novak told CNBC on Wednesday.

On Tuesday, Saudi Arabia Energy Minister Khalid al-Falih told CNBC that cooperation between OPEC and non-OPEC producers should continue — in some form or another — past the end of the calendar year. He added that Riyadh's bilateral relationship with Moscow would be a "key ingredient" for that to happen.

Speaking at the World Economic Forum (WEF) in Davos, Switzerland, Novak said he "fully agreed" with his Saudi counterpart.

And when asked whether something longer-term was happening regarding the relationship between the world's two largest oil producers, Novak replied: "I have the same feelings and they are based on the fact that firstly we have fairly frequent and positive contact at the highest level."

Khalid Bin Abdulaziz Al-Falih, Saudi Arabia's energy minister and president of OPEC, speaks as Alexander Novak, Russia's energy minister, left, listens during a news conference following the 172nd Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Thursday, May 25, 2017.
Akos Stiller | Bloomberg | Getty Images
Khalid Bin Abdulaziz Al-Falih, Saudi Arabia's energy minister and president of OPEC, speaks as Alexander Novak, Russia's energy minister, left, listens during a news conference following the 172nd Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Thursday, May 25, 2017.

'Development of political relations'

Russia and Saudi Arabia are leading a joint OPEC and non-OPEC effort to try and reduce a global supply overhang and prop up prices. Brent crude oil futures have soared 50 percent since mid-2017, reaching $70 a barrel for the first time in over three years earlier this month.

The main price driver has been a supply cut from OPEC and its allied producers, who started to withhold output in January 2017. The production cuts are scheduled to last throughout 2018.

Russia Energy Minister Alexander Novak pictured at a joint press conference during the 173rd Ordinary Meeting of the Organisation of Petroleum Exporting Countries (OPEC) in Vienna, Austria on November 30, 2017.
Omar Marques | Anadolu Agency | Getty Images
Russia Energy Minister Alexander Novak pictured at a joint press conference during the 173rd Ordinary Meeting of the Organisation of Petroleum Exporting Countries (OPEC) in Vienna, Austria on November 30, 2017.

Nonetheless, while the two countries appear poised to work together to support the energy market next year, Novak also said cooperation would likely transcend into other areas too.

"Of course, we are concentrating on the development of economic and trading collaboration and the development of our political relations as well," he said, according to a translation.

In October, Russia rolled out the red carpet for Saudi Arabia's King Salman as the monarch led a high-profile and highly significant delegation to Moscow. It was the first ever state visit to Russia by a reigning Saudi monarch.

The visit was seen as a sign of increasingly cordial relations and closer economic and political ties between the two oil giants. However, not all observers are convinced of Russia and Saudi Arabia's newfound collaboration and harmony.

Russia and Saudi were at odds during most of the Cold War and Riyadh has been hampered by Moscow's decision to support Syrian President Bashar al-Assad at a time when Saudi Arabia was supporting the Syrian opposition.