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Russia could propose big Dec oil cut, firms oppose

MOSCOW, Dec 4 (Reuters) - Russian oil firm executives said on Tuesday they had been informed that Energy Ministry officials could propose a huge 380,000 barrels per day cut in output for December at a meeting this week with the Russian prime minister.

But they said the idea, which appears to be a negotiating position, was very unlikely to make progress.

Analysts also saw little chance for such a proposal to make a headway and said Prime Minister Mikhail Kasyanov might not even raise it at the talks.

"The month has already begun and I don't see how companies can stop the oil from flowing. I hope Kasyanov understands this as well," an official in one of Russia's major oil firms said.

Kasyanov is set to meet oil executives on cuts to crude output or exports on Wednesday as both sides haggle on what steps to take, industry sources and company officials said.

"Now there is a major feeling that the meeting will take place tomorrow in the morning," a source in a major oil firm said. Other industry sources had said earlier they expected the meeting on Tuesday. Kasyanov's spokeswoman also told Russian news agencies the meeting might take place on Wednesday.

Industry sources said they expected the meeting also to discuss oil output and exports cuts in the first quarter of 2002 as well as possible measures to ease the export of oil products.

Analysts said the Energy Ministry's initiative on a huge oil output cut was unlikely to be approved and would probably not even be discussed during Kasyanov's meeting with oil majors.

"The cut seems to be unrealistic. Usually, we can expect a one or two percent drop in oil output due to the winter season factor," said Alfa-Bank oil analyst Konstantin Reznikov.

A preliminary schedule shows Russia expects to produce 30.6 million tonnes of crude (7.24 million bpd) in December 2001. A cut of 380,000 bpd would be a five percent drop in this amount, well ahead of the normal seasonal adjustment.

Russia, the world's second largest oil exporter, is under pressure to help oil cartel OPEC support world crude prices by offering to increase output and export cuts, although it has given conflicting signals whether it will do this or not.

Russia has offered only a tiny 50,000 barrels per day reduction in output for the fourth quarter.

It said last week it might decide on deeper output cuts from January 2002, the period that matters to OPEC. An industry source said some oil firms were ready to discuss deeper cuts from the first quarter, but would like the government to cancel export quotas and to lower export tariffs for oil products.

OPEC has told non-OPEC producers Russia, Mexico, Norway and Oman they must slice a combined 500,000 bpd to trigger a 1.5 million bpd reduction by OPEC from January 1.

The Russian government has only limited leverage in regulating oil output as it has privatised almost the entire industry. Firms are divided on cuts as some of them have invested billions in recent years to boost output.

(Additional reporting my Mikhail Yenukov)

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