Moscow - Russia may cut oil production to shore up flagging prices, but its ability to change output is limited and no decision has been made yet, its energy minister said, underlining Moscow's desire for a higher oil price.
Before OPEC meets next week, Russia has already spoken to members Venezuela and Saudi Arabia about the need to support the oil market, and Moscow expects to send a high-ranking delegation to Vienna before the meeting to press the message on prices.
Russia's already weak economy has been hit by the falling price of oil, which together with natural gas generates half of state revenue.
A price of at least $100 a barrel is needed to balance the government budget, and some experts say Russia may need oil prices to be as high as $115, because the budget has to cover increased social and military spending and compensate for sanctions over Ukraine that have cut Moscow off from Western financial markets.
Asked whether Russia is ready to cut production, Energy Minister Alexander Novak told reporters on Friday: “This issue requires careful consideration ... But on the whole, this question is being discussed, but there are no final decisions on it.”
The minister said a production cut would be difficult for Russia, because the budget relies on revenues from oil exports, and the country lacks what he described as the “technology” to act quickly to alter supply.
Analysts say Russia can do little to shore up the oil price, which had fallen by a third since June to under $80 a barrel, because it lacks storage facilities and may be unable to stop pumping at wells for fear they will freeze over.
While much of Russia's oil industry is state-controlled, private domestic producers furthermore may be reluctant to enforce cuts.
Vagit Alekperov, head of second-largest Russian oil producer Lukoil, said any attempt to regulate production would be inappropriate and could interfere with supply and demand.
Some analysts predict that Russia, the biggest oil producer outside of OPEC, may lose some 350,000 barrels per day of output as soon as next year due to weak drilling and low prices, which may slightly support prices.
The prediction was recently dismissed by the Energy Ministry, which still sees next year's output at 10.5-10.6 million bpd.
Russian Foreign Minister Sergei Lavrov met with Saudi Foreign Minister Prince Saud al-Faisal on Friday. “The two sides expressed their willingness to cooperate on issues related to energy and oil markets,” a ministry statement said after the meeting.
Lavrov told reporters after the meeting that oil-producing countries were entitled to react adequately if they saw that prices were being artificially driven.
Novak and Igor Sechin, chief executive officer of Russia's biggest oil producer Rosneft and an ally of President Vladimir Putin, will travel to Vienna before the meeting of OPEC, but both have kept silent on who they will meet.
Reuters