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OPEC can't hope for production cut from non-members

Pleas for help have gone out to fellow crude exporters Russia, Mexico and Norway but -- just days ahead of Wednesday's crunch OPEC board meeting -- it is highly unlikely they will cooperate in a large-scale production cut, analysts say.

As the world economic crisis hits industrial output and consumer spending around the globe, world oil prices have tumbled from July's all-time high of 147 dollars a barrel to today's mid-40 dollar rate.

The rout has left OPEC countries that depend on oil for foreign revenue facing a dramatic cash shortfall, and members have signalled they intend to cut exports and force up prices at a meeting in Algeria this week.

But the cartel only accounts for 40 percent of world supply and, without a similar output cut from fellow large exporters, it may find its ability to influence the market limited when it meets in the Mediterranean port of Oran.

The group's best hope remains Russia, which has traditionally guarded the independence of its energy policy and output targets, but which last week signalled its readiness for closer coordination with OPEC.

One of Moscow's deputy prime ministers, Igor Sechin, and its energy minister Sergei Shmatko, are expected in Algeria on Wednesday, and President Dmitry Medvedev has not ruled out one day joining the organisation.

"I would like to say that we are ready to protect ourselves as this is our base income, oil and gas," Medvedev said in remarks broadcast Thursday.

"Such protective measures can be linked to a reduction in oil production volumes, joining existing organisations of suppliers as well as participation in new organisations, if we can agree about this ahead of time," he added.

Although Russia has demonstrated a willingness to use its energy wealth as a political tool in its rivalry with the West, NATO-member Norway and US-neighbour Mexico are much less likely to help OPEC, analysts say.

Bill Farren-Price, director of energy analysts Medley Global Advisors, said: "I don't expect anything from non-OPEC producers," even Russia, despite its slide into recession and its many beefs with Washington.

"They (Russia) already have problems with production, with the low oil price. They need all the oil revenue," he said, ruling out a production cut and noting that many Russian firms have contractual obligations with Western majors.

Russia's cooperation with OPEC is likely to be limited to technical accords on investment contracts, he said, recalling that in 1998 and 1999, when oilprices fell to 10 dollars, Moscow broke a promise to cut production.

On Friday, the vice chairman of Russian state-owned energy giant Gazprom said Friday that his country would have difficulty taking part in OPEC's production quota system to limit output.

"The mechanism of OPEC couldn't be applicable straight-forwardly to the Russian Federation," Alexander Medvedev told a press conference here.

"We are in contact with OPEC to exchange information," he added, saying this was "a good signal for the market because ... it gives support (to prices)."

"If Russia announces a production cut, the market could play on it for one or two days," said Bill Ramsay of the French Institute for International Relations, but added if Moscow reneges on the promise "it will hit OPEC later."

Nevertheless, David Kirsch, from the consultants PFC Energy, said that any sign of Moscow cosying up to OPEC members from the Arab world, Nigeria and Venezuela could worry markets enough to give prices a bump.

"It's always helpful to have Russia saying it's going to cooperate with OPEC and that it won't be a priority for Moscow to bring oil investment up," he said, while admitting that this does not apply to other non-members.

Mexico, he said, was guaranteed 80 to 90 dollars a barrel under already signed contracts with importers, while Norway's economy is not dependent solely on energy exports and therefore suffers less from low prices.