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Crude oil rises after Russia said it will back cutting supply

Crude oil rose 6 percent after Russia, the second-biggest exporter following Saudi Arabia, said it would support an OPEC decision to lower production.

Russia's prime minister said companies may reduce exports to help lift prices that reached a two-year low on Tuesday. OPEC next week will consider slashing production for the fourth time this year, which Saudi Oil Minister Ali al-Naimi said might send output to the lowest level since the Persian Gulf War a decade ago.

"The Russians have been a big problem because they have been increasing production," said James Fiedler, a senior oil broker with Man Financial Inc. in New York. "The rally started when the Saudis said that a cut of over 1 million barrels a day was probable. The Russian news is prolonging it."

Crude oil for December delivery rose as much as US$1.24, or 5.9 percent, to US$22.41 a barrel on the New York Mercantile Exchange, the biggest one-day gain since Sept. 14. Prices rose 11 percent this week, the biggest increase since October 2000, when prices were rising toward a 10-year high of about US$36 a barrel the following month.

In London, Brent crude oil for December delivery rose as much as US$1.32, or 6.5 percent, to US$21.60 a barrel on the International Petroleum Exchange.

Russian Prime Minister Mikhail Kasyanov said six or seven of the nation's biggest oil companies may decide early next week to reduce exports, according to spokeswoman Tatyana Razbash.

The statement marks a turnaround for Moscow, which earlier had refused to cooperate. The energy minister last month said daily oil exports in the fourth quarter will drop by 1 million tons, or 80,000 barrels, though only because of rising domestic demand during winter.

Russia's two biggest oil producers, OAO Lukoil and AO Yukos Oil Co, declined to comment. Of Russia's six biggest oil companies, one is closely held and five are publicly traded. The government doesn't have controlling stakes in any of the companies, though it owns the state's pipeline monopoly.

The Organization of Petroleum Exporting Countries has made agreements with Russia before. In April 1999, non-OPEC producers Mexico, Norway, Russia and Oman agreed to reduce world oil output for one year, by a total of about 7 percent. That year, Russian oil exports actually increased by 400,000 barrels a day, the International Energy Agency reported.

"It's hard to see how the government can get the oil companies to cut exports unless they have something to offer them," said Lisa Rothenberg, a Russian energy analyst at Energy Security Analysis Inc, a consulting firm in Wakefield, Massachusetts. "The Russian oil industry is privatized, not state controlled like in the OPEC countries."
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