Russia may cut output along with OPEC

Russia's energy minister said on Tuesday he would not rule out cutting production along with OPEC, which meets this weekend as prices tumble, but analysts said it would be difficult for Moscow to take meaningful action.

Russia, which vies with Saudi Arabia as the world's biggest oil producer, has strengthened ties with the Organisation of the Petroleum Exporting Countries (OPEC) this year with pledges to share more information, but has not suggested it would be ready to take the next step and actually shut in production.

Iran's oil minister was quoted as saying last week that OPEC members would discuss opening up negotiations with non-OPEC producers to seek their help in managing the oil market when the 12-member group meets informally in Cairo on Saturday.

"Russia will cooperate with OPEC to defend its interest. We would like to understand the process involved. Russia would coordinate with OPEC," Sergey Shmatko told reporters in New Delhi, where he was attending a conference.

Russia pumps around 10 percent of the world's crude.

Asked what that coordination could involve, he said: "Exchange of information on market development, finalising investment programme. We cannot rule out cutting production as well."

US crude, which had soared to a record close to $150 a barrel in July, has fallen swiftly to below $50 a barrel last week, prompting OPEC members Iran and Venezuela to suggest the cartel cut at least another one million barrels per day (bpd) after last month's 1.5 million bpd cut failed to lift prices.

The last time non-members cut output together with the cartel was in January 2002, when Russia, Mexico and Norway moved to revive prices that had fallen below $20.

US crude oil prices, which rallied sharply on Monday on growing hopes for OPEC action this weekend, fell more than $2 a barrel to near $52 on Tuesday.

Shmatko, who said last week that Russian oil companies should decide for themselves whether or not to curb unprofitable production, said on Tuesday the country's budget had been prepared assuming crude prices would be at $70 a barrel.

While some industry officials in Russia have advocated closer ties with OPEC, which pumps over a third of the world's crude, others say the lack of a single national producer would make it difficult for Moscow to effectively control output.

"The idea is not new, although it would be difficult for Russia to fulfil it," said Lev Snykov, an analyst at VTB Capital in Moscow. "Russia has not got a single national oil company. It has at least five companies which export oil, which means the process would technically be more difficult."

But low investment in recent years and planned cuts in investment by oil firms may hit Russia's output and help OPEC support prices all the same, he said.

Norway's deputy petroleum and energy minister Liv Monica said in Oslo it had no plans to cut output. (Reuters)

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