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 yesterday: “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.
Reuters
