September 28, 2012 / 1:20 PM / 5 years ago

Russia, OPEC rekindle a relationship

MOSCOW (Reuters) - Russia’s energy minister met OPEC Secretary General Abdullah al-Badri in Vienna earlier this week as the world’s leading crude producer seeks to bolster ties in the faces of increasing oil prices volatility, the minister told a Reuters Summit.

OPEC Secretary General Abdullah al-Badri addresses a news conference after a meeting of OPEC oil ministers at OPEC's headquarters in Vienna, June 14, 2012. REUTERS/Heinz-Peter Bader

Alexander Novak said producers had little leverage over prices, which, he said, were increasingly influenced by oil futures trading.

Moscow briefly flirted with the Organization of the Petroleum Exporting Countries at the end of 2008, hinting it may cut crude production to stem an uncontrollable fall in the oil prices, which hit $32 per barrel in December of that year after peaking near $150 in July.

OPEC ministers at that time said they saw no concrete signs of Russian cooperation and the liason became chillier.

Novak said he and Badri discussed stepping up an exchange of information between Russia and OPEC, whose members pump 31.3 million barrels of crude oil per day.

Russia, which pumps more than 10.3 million barrels per day, is the world’s largest producing nation but has no spare capacity, unlike leading OPEC producer Saudi Arabia, for long the top global supplier. It depends on oil and gas revenues for half its budget revenue.

“Speculative games on the futures markets could result in seriously price fluctuations,” Novak said. “Volatility today depends not only on the balance of supply and demand.”

“Our opinion, as is OPEC‘s, is that the prices should be more or less stable,” he said, adding that the current level of price of around $100 per barrel is “normal”.

“On the whole, the prices could oscillate from $80 to $120 in the nearest future. But high volatility is bad for the market participants.”

Russian officials participated as observers in OPEC meetings in 2008-2009, but since then cooperation between the two crude producers has fallen off.

Novak was appointed energy minister of the world’s top crude producer, in May after Vladimir Putin returned to the Kremlin.

Novak said he went to Vienna at the invitation of Badri, who, he said, wanted to develop contacts with the new government, and said he invited Badri to Moscow in the end of October to take part in a conference.

“We discussed in detail the issues of demand and supply, balance and oil prices.”

Benchmark North Sea Brent crude has swung between a high of more than $128 per barrel and a low of $88.49 this year. The trading range of nearly $40, resulting from heightened Middle East supply worries and a weakening growth outlook, is the widest since 2009, when it was $40.91. In 2011, the range was $34.65 and in 2010, $27.33.

High oil prices are of a big concern for consuming countries, which are struggling to overcome economic woes partly incurred by expensive commodities.

Novak said he did not see much room to increase global oil output further. Russia’s government is targeting an increase in Russian crude production to 514-515 million tonnes (10.3 million barrels per day) from 511 million tonnes in 2011.

(For other news from Reuters Russia Investment Summit, click here)

Reporting by Vladimir Soldatkin, Darya Korsunskaya, Melissa Akin, editing by William Hardy

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