Moscow has ditched the idea of launching a joint structure with the Organization of the Petroleum Exporting Countries (OPEC) but will continue to cooperate with major oil producers, according to the Russian energy ministry.

Earlier this year, Russian energy minister Alexander Novak touted the idea that a new organization based on OPEC+ format – including OPEC members and allied oil suppliers led by Russia – will begin operations starting January 1, 2019 in an effort to boost the market. Back then there were plans to choose a location for the headquarters and come up with a name for the structure.

Also on OPEC-Russia alliance to extend oil production cuts if necessary

The energy minister announced Moscows change of heart on Thursday, saying that an official alliance would only create a new headache for all the players on the market. Instead, a special mechanism of cooperation will be set up that will allow members to convene, discuss and adopt memorandums or joint resolutions, according to Novak.

“There will be no formal organization like OPEC, as it is additional bureaucratic difficulties linked to the cartel, antitrust laws of countries, sanctions, contributions,” the minister said as cited by Russian media.

He added that the text of the charter regulating the cooperation between OPEC and non-OPEC states is almost ready and it has already been sent through the executive body of the cartel, the OPEC Secretariat.

Also on Cha-ching! OPEC+ deal adds extra $120 billion to Russia's coffers, energy minister says

Despite attempts to regulate the market, it will still be facing an oversupply of up to 2 million barrels per day in the first two quarters of 2019, the minister warned. Moreover, US sanctions on Iran add uncertainty to the situation and the players have to be ready for any consequences, according to Novak. He explained that in April the American exemptions to eight counties to buy oil from the Islamic Republic are to expire and it is unclear what they will do with the purchases from Tehran.

The OPEC-Russia alliance to curb oil output in a bid to boost global crude prices has existed since 2016 and has been repeatedly extended since then. In December, the cartel and its allies agreed to cut crude output by 1.2 million barrels per day (bpd) and later vowed to extend the cuts for another six months if necessary.

For more stories on economy & finance visit RT's business section

Original Article