Russia to Suggest oil Output Cuts, Eyes Oil Reserve

Moscow may make oil output cuts of 15 mln t in 2015; Russia risks fall into recession with oil under $60 per barrel.

Russia, in desperate need of higher oil prices, is making a last-ditch attempt to sway this week's OPEC meeting by suggesting Moscow could cut output if the group does the same.

Thursday's OPEC meeting is among the most difficult to call in years after Saudi Arabia signalled it was prepared to withstand lower oil prices for a prolonged period.

Non-OPEC member Russia needs an oil price of $100 per barrel to balance its budget. With oil prices threatening to go as low as $60 if OPEC does not agree a significant output cut, Moscow could see its economy fall into recession.

Citing sources, Kommersant daily newspaper said Russia might suggest cutting its oil production by around 15 million tonnes a year (300,000 barrels per day) from next year and that Moscow expected OPEC to limit its output by another 70 million tonnes.

Russia is among the world's top three crude oil producers, along with the United States and Saudi Arabia, and last month was pumping near post-Soviet highs of 10.6 million bpd.

Russia's Energy Ministry declined to comment.

Some analysts say an OPEC cut of as much as 1.5 million barrels per day is needed to support oil prices. Benchmark Brent prices are down around 30 percent since June at around $80 per barrel.

Russia has already spoken to OPEC members Venezuela and Saudi Arabia about the need to support the oil market and hopes to press its message further in Vienna on Nov. 25, before the producers' group meets.

Russian Energy Minister Alexander Novak said last week Moscow was looking at the option of cutting oil production, but said the measure had yet to be agreed.

A source familiar with the matter told Reuters that the idea in Kommersant was one possible option and that there were other ways of shoring up prices.

In the early 2000s, Russia promised to cut its exports to help OPEC curb a decline in oil prices but never followed through.

In 2008, a high-ranking delegation headed by former deputy prime minister Igor Sechin, now chief executive officer of Russian state oil producer Rosneft, attended an OPEC meeting in Algeria but did not contribute to any supply cuts, despite Moscow needing higher prices at the time.

Some analysts predict that Russia may lose some 350,000 barrels per day of output as soon as next year due to weak drilling and low prices.

And they say it can do little to shore up the oil price because it lacks storage facilities and may be unable to stop pumping at wells for fear they will freeze over.

Alexander Nekiperov, chairman of the board at Rosneft, said on Monday Russia should return to the idea of creating a state oil reserve for use when markets are volatile - an idea Russia's economy minister said had not been discussed.

"We should return to the issue of creating infrastructure which would allow the state to create oil stocks during periods of oversupply and to send it onto the market when the situation is the opposite," he told the upper house of parliament.

"Why is there a grain reserve but not an oil one?"

Reporting by Katya Golubkova and Oksana Kobzeva