Saudi Arabia and Russia are working on a long-term pact that could extend controls over world crude supplies by major exporters for years.
Saudi Crown Prince Mohammed bin Salman said that Riyadh and Moscow were considering a deal to extend a short-term alliance on oil curbs that began in January 2017 after a fall crash in crude prices.
“We are working to shift from a year-to-year agreement to a 10 to 20-year agreement,” the crown prince told Reuters on Monday.
“We have agreement on the big picture, but not yet on the detail.”
Russia, which has never been a member of the Organisation of Petroleum Exporting Countries (Opec), has worked alongside the 14-member cartel during earlier oil gluts, but such a deal between the two would be unprecedented.
Top Opec producer Saudi Arabia recruited Russia and other non-Opec countries to help drain a glut when oil prices collapsed from more than $100 a barrel in 2014 to below $30 in 2016.
Crude has since recovered to $70 but fast-rising output from US shale producers has capped prices.
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"This is all about whether the arrangement is a short-term expedient to deal with this particular crisis in the oil market, or whether it reflects a realignment in world oil," said historian Daniel Yergin, vice-chairman at consultancy IHS Markit.
“Opec countries want to find a way to institutionalise this relationship rather than to have it be a one-shot deal.”
News of the potential oil alliance comes at a time when Riyadh and Moscow have worked to cement an economic relationship despite being at odds over the conflict in Syria, where they back opposing sides.
Riyadh supports insurgents fighting Syrian president Bashar Al Assad’s army, while Russian and Iranian forces have backed Al Assad – meaning that Russia effectively sides with Iran, Riyadh’s regional arch-foe.
Last October, Saudi King Salman became the first sitting Saudi monarch to visit Russia. He led a delegation to Moscow that agreed joint investment deals worth several billion dollars, providing much-needed investment for a Russian economy battered by low oil prices and western sanctions.
Despite their differences in the Middle East, Russia and Saudi Arabia have been drawn together by a common interest in propping up flagging world oil prices, and by the fact that Moscow, since its military intervention in Syria, has clout in the Middle East that other countries in the region cannot ignore.
The crown prince predicted that world oil demand would not peak until 2040, despite advances in renewable energy technologies and the electric vehicle.
In an attempt to end Saudi Arabia’s reliance on oil, he is leading a push to diversify the Saudi economy away from oil and gas by 2030.
Riyadh plans to raise funds through the flotation of a five per cent stake in state Saudi oil company Aramco. Time is running out for an initial public offering this year but the crown prince said the IPO could still take place at the end of 2018 or in early 2019, depending on financial market conditions.
Saudi oil minister Khalid Al Falih said last week that documentation was ready but that a venue for the IPO had not yet been decided. The New York Stock Exchange is still in the running for the IPO, alongside London and Hong Kong, but Mr Al Falih said there was a risk of a “frivolous” legal action if Aramco were listed in the United States.