Russia May Coordinate Oil Production Cut With OPEC

By Thomas Kutty Abraham and Lucian Kim

Nov. 25 (Bloomberg) -- Russia may coordinate oil production cuts with OPEC as the world’s second-largest crude exporter reels from falling energy prices.

“Russia will coordinate with OPEC to defend its interests,” Energy Minister Sergei Shmatko said at a conference in New Delhi today. “We cannot rule out cutting production.”

The largest oil producer outside the Organization of Petroleum Exporting Countries, Russia made a formal proposal for closer cooperation in September. OPEC Secretary General Abdalla el-Badri met with Russian President Dmitry Medvedev in Moscow last month to discuss future coordination.

“Issues of coordination are actually much wider than just cutting production,” Shmatko said. “There will be an exchange of information on market developments and the finalization of investment programs.”

OPEC, which controls more than 40 percent of world oil supply, has already cut production as crude prices fell to a third of a July high of almost $150 a barrel. Oil ministers from the 13-nation group will next meet on Nov. 29 in Cairo and are due to hold another summit on Dec. 17 in Algeria to discuss production targets.

Venezuelan President Hugo Chavez said OPEC should return to a system of setting a price band for crude oil in order to guarantee market stability.

The country would consider a price of $80 to $100 a barrel to be “fair,” Chavez said yesterday in a televised press conference in Caracas. OPEC created price bands in the late 1990s to try to keep oil between $22 and $29 a barrel.

Russia, the largest crude exporter after Saudi Arabia, is struggling to keep production at current levels as older fields mature and credit for new projects dries up.

To contact the reporters on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net; Lucian Kim in Moscow at lkim3@bloomberg.net