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Russian Oil Production Hits New Record Despite Talk Of Cuts

A worker checks a valve on an oil pipe at the LUKoil-owned Imilorskoye oil field outside the western Siberian city of Kogalym.
A worker checks a valve on an oil pipe at the LUKoil-owned Imilorskoye oil field outside the western Siberian city of Kogalym.

Russian oil production hit a post-Soviet high last month even as top Russian officials on February 2 continued to push for a deal with the OPEC oil cartel to curb booming global production.

Igor Sechin, the head of Rosneft, Russia's state-owned oil company and its biggest producer, met with Venezuelan Oil Minister Eulogio Del Pino in Moscow and said afterward that the two men had discussed possible joint efforts to stabilize global oil markets.

Russian Foreign Minister Sergei Lavrov, traveling in the Middle East, also said Moscow was open to coordinating with the oil cartel and countries outside the cartel on curbing production and boosting prices.

"We are open to other forms of cooperation if there is a wish shared by everyone to hold a meeting...between OPEC members and countries outside OPEC," he said. "Naturally, we would be ready to join such a consensus."

Russian Energy Minister Alexander Novak had met with Venezuela's del Pino on February 1 as he sought to drum up support for joint action to prop up falling crude prices. Both continued to hold out the possibility of joint consultations between OPEC and non-OPEC countries in the near future, the Energy Ministry said.

The talk of cooperation has not bolstered oil prices or global stocks this week like it did last week, however. Oil prices resumed their sharp decline on February 1-2, falling below $30 again in New York and London, and dragging down global stock markets.

Moreover, despite Moscow's hints that it is ready to cut production if other major producers agree, preliminary data from the Russian Energy Ministry on February 2 showed Russia was actively ramping up production last month, adding to a global glut that has caused a price collapse of nearly 75 percent since 2014.

The data showed production hit a fresh post-Soviet high in January of 10.88 million barrels per day, up from 10.80 million barrels in December, which was the previous record.

OPEC production also jumped to its highest in recent history in January as Iran increased sales after the lifting of sanctions and rivals Saudi Arabia and Iraq also boosted supply, a Reuters survey showed last week.

That data suggests that despite talk of joint efforts to curb production, the opposite has occurred as the battle for market share among producers has only intensified in recent weeks.

Analysts and OPEC officials say reaching agreement with Russia on output cuts would be difficult as long as top OPEC producer Iran continues to ramp up production and add to markets already flooded with too much oil.

OPEC delegates, speaking anonymously to Reuters, have been cool to Russia's entreaties because of the dim prospects for success at coordination. They point out that failure to reach agreement at a meeting that was both highly publicized and anticipated in world markets would only add momentum to the fall in oil prices.

"I very much doubt there will be any success in coordination. There is no consensus inside OPEC itself," Alexander Kornilov, a senior oil and gas analyst with Aton, told Reuters.

With reporting by Reuters and AFP
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