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Russia trims oil output
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November 12, 2001: 7:45 a.m. ET
Symbolic cut ahead of OPEC meeting; Brent crude prices falls 2 percent
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LONDON (CNN) - Russia has agreed to a small cut in oil production in a symbolic move to support OPEC efforts to boost world crude prices.
Russia announced on Monday it would cut 30,000 barrels per day in the fourth quarter of 2001 and the start of 2002, a government spokesman said after a meeting with oil companies and Prime Minister Mikhail Kasyanov.
Russia, the world's second largest oil exporter, currently produces almost seven million bpd and exports three million bpd. That makes the announced output reduction equal to 0.43 percent of daily output.
Brent crude futures for December delivery fell 43 cents to $20.95 in midday trading on London's International Petroleum Exchange after the Russian announcement.
The announcement was made as Saudi Oil Minister Ali al-Naimi held talks in Moscow.
Naimi said Saudi Arabia and Russia had agreed on the need for co-ordination to secure a "fair" oil price of between $22 and $25 a barrel, the official Saudi Press Agency reported.
His Russian counterpart Igor Yusufov said his government and Russian oil companies were ready to co-operate with Organisation of the Petroleum Exporting Countries "to achieve oil market stability and to work to avoid a slump in the global economy."
The output decision was announced after top oil firms, including the two largest, LUKOIL and YUKOS, met Kasyanov.
"General recommendations have been worked out about the usefulness, as a temporary measure, of a reduction in output volumes of 30,000 barrels per day in a fourth quarter and the beginning of 2002," a government spokesman was quoted as saying by Interfax news agency after the talks.
Meeting in Vienna on November 14, OPEC members are expected to agree on a fourth output cut this year in an attempt to lift oil prices from a slump sparked by an economic downtown.
Prices have fallen by 30 percent since the terror attacks of September 11.
Saudi Arabia has said the cut could be as much as 1.5 million barrels a day as OPEC seeks to prevent inventories growing further to repeat the glut of 1998 that sent oil prices down to $10 a barrel.
Russia has in the past paid lip service to OPEC, saying it would cut output but then doing nothing. Russia tends to export as much as it can as it needs every oil dollar to fund its budget and meet payments on its $140 billion of foreign debt.
In October OPEC reduced output by 350,000 bpd to 24.12 million bpd but production still was 920,000 bpd above its self-assigned levels for 10 member countries.
Analyst Lawrence Eagles from GNI said: "Traders will rightly remain skeptical of [Russia's] commitment to any agreement.
"However, nobody can dispute the immense progress that has been made by OPEC over the past few weeks."
Compliance has improved since the beginning of October, when the market was looking for a reduction of 700,000 to 1 million bpd, he said.
"OPEC is now talking about a 1 to 1.5 million bpd cut and Mexico and Russia are at least talking about output cuts," Eagles said.
He said if the full reduction is implemented, it is possible that prices could return to within the lower half of the $22-$28 price band.
The International Energy Agency said the West has a comfortable cushion of stockpiled oil for winter after a slump in demand.
Commercial stocks among the industrialised nations of the OECD rose 1.18 million barrels a day in September and 500,000 bpd on average in the third quarter to reach 2.6 billion barrels, it said.
The IEA estimated that global oil demand fell 750,000 bpd year-on-year during the third quarter, confirming the big downward revision to demand projections it made last month.
"While jet fuel deliveries held up better than had been expected, OECD demand fell by 2.5 percent in September, the steepest monthly drop this year," it said.
The IEA left unchanged its forecasts for world oil demand growth at 100,000 bpd this year to 76 million bpd and 600,000 bpd in 2002 to 76.6 million. 
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