OPEC Wants 2% Cut From Russia

BloombergChakib Khelil, Algeria's oil minister and OPEC president, speaking to reporters Monday at his hotel in Oran, Algeria.
LUKoil president Vagit Alekperov said Monday that OPEC wanted Russia to cut its crude output by at least 200,000 barrels per day, as expectations of broad cooperation on a major supply reduction helped send oil back over $50.

The Organization of the Petroleum Exporting Countries will likely cut output yet again when it convenes Wednesday, after a reduction of 1.5 million bpd in October did little to stem crude's fall from nearly $150 per barrel this summer.

"If the government makes the decision to reduce production, then we will fulfill it," Alekperov said on the sidelines of a conference, Interfax reported. LUKoil is Russia's largest private oil producer, trailing only state giant Rosneft overall.

Alekperov also said OPEC saw the upper limit for a cut by Russia at 300,000 bpd. Reductions of 200,000 or 300,000 bpd would slash Russia's current output by 2 percent and 3 percent, respectively.

The country's oil executives are already predicting a production slump across the industry next year, and Alekperov said an OPEC-related cut would reduce output even further.

LUKoil vice president Leonid Fedun said in October that Russia could easily reduce production by 300,000 to 400,000 bpd and suggested that the country act in concert with OPEC to bolster prices.

The growing consensus among producers on cutting supply helped buoy world crude prices Monday, with Urals for delivery in January rising as high as $50.44 and WTI also briefly crossing the $50 mark in New York.

Russia, the largest oil producer outside OPEC, has been moving closer to the group as plummeting crude prices threaten its economy and budget revenues. President Dmitry Medvedev said last week that Russia might cut output and even join new and existing "suppliers organizations" to defend budget revenues.

If Russia decides to go ahead with output cuts, it will spread the task unevenly, said Lev Snykov, an analyst at VTB. Companies that would have difficulty maintaining or increasing production could be asked to lower their output the most, he said.

OPEC president Chakib Khelil said Monday that Russia offered its "concrete support" to the 13-member group, which accounts for more than 40 percent of world supplies, Reuters reported.

Zoreli Figueroa, a spokeswoman for OPEC, said she could not immediately comment Monday on how steep Russia's cuts should be.

Energy Minister Sergei Shmatko — who is expected to attend Wednesday's meeting with Rosneft chairman and Deputy Prime Minister Igor Sechin and several other top state and private oil executives — has said Russia will voice its proposals about a reduction on the day of the summit.

Russia, which is heading for its first annual production decline in a decade, produced 9.7 million barrels of crude daily in October, the State Statistics Service said Monday, a 0.7 percent drop year on year.

Alekperov also said Monday that LUKoil had not yet reached a deal with Repsol on taking a stake in the Spanish oil company, and that LUKoil was considering cutting investment in 2010 and rescheduling its international projects.

Rosneft vice president Peter O'Brien said Monday that the company would respond "constructively" to a Russian decision to cut supplies with OPEC, Interfax reported.