VIENNA - Russia's most powerful oil official, Igor Sechin, was due in Vienna on Tuesday for talks with OPEC members as the group's leader Saudi Arabia kept the market guessing about its response to flagging oil prices.
Sechin, the head of state oil company Rosneft (ROSN.MM: Quote, Profile, Research) and a close ally of Russian President Vladimir Putin, is expected to meet OPEC officials amid hints from Moscow that Russia could cut output or exports if the producer group does the same.
Oil prices have fallen 30 per cent since June to below $80 per barrel as a global oil glut has built up on the back of a US shale boom and lower global demand because of slower economic growth in China and Europe.
Current prices are far below what most OPEC members and rival producers such as Russia need to balance their budgets.
Oil market watchers are divided on the outcome of the meeting in Vienna. Predictions range from a large OPEC production cut to revive prices, to a small reduction, or none at all.
Some analysts say an OPEC cut of as much as 1.5 million barrels per day (bpd) is needed to support oil prices and avoid a glut aggravating in the first half of 2015.
However, Saudi Arabia has kept the market guessing in recent weeks about its intentions.
Diplomatic and market sources say Saudi officials told briefings in recent months that the kingdom, with its large currency reserves, was prepared to withstand oil prices as low as $70-$80 per barrel for up to a year.
When veteran Saudi Oil Minister Ali al-Naimi spoke earlier this month after weeks of silence, he said Riyadh's desire for stable markets had not changed but gave no clue about his potential response.
"Although the objectives of the cartel are unclear today, what is apparent is that investors and companies are being shocked out of the $100 per barrel oil comfort range of the last four years and that volatility looks set to remain a feature in 2015," analysts from Barclays wrote on Tuesday.
In Vienna on Monday and Tuesday, Naimi brushed off reporters' questions about oil prices and surplus supplies.
Asked whether he thought this week's meeting might be a difficult one, as many analysts have said, he replied: "No -- why?" He added: "This is not the first time the market is oversupplied."
OPEC meets on Thursday. The fact that Naimi arrived three days before the meeting indicates he is gearing up for long talks with fellow ministers and possibly Sechin.
At OPEC's last meeting held in June, when oil prices were well over $100 a barrel and an output change was deemed very unlikely, Naimi arrived later than usual -- on the morning of the talks.
Russia's Kommersant newspaper cited sources on Monday as saying Russia might suggest cutting its oil production by around 300,000 bpd from next year and that Moscow expected OPEC to limit its output by another 1.4 million bpd.
If Russia were to agree to cut production, it would effectively side with OPEC hawks such as Venezuela, which have been putting pressure on Saudi Arabia to reduce supplies.
Industry players are sceptical, however, that Russia may do anything significant to shore up prices.
Moscow's relations with OPEC were soured by its pledge to cut output in tandem with OPEC in the early 2000s -- Russia failed to follow through, and raised exports instead.
Iranian news agency Shana said Putin and Iranian President Hassan Rouhani spoke by telephone on Monday evening and agreed "on necessary cooperation in favour of oil markets".
The agency did not say where it acquired the information. On Monday, the Kremlin said the presidents discussed Iranian nuclear talks and bilateral issues and made no mention of oil.
On Monday, Iran and six world powers agreed to yet another extension in the talks aimed at resolving a 12-year-old dispute over Tehran's nuclear programme until June 30, 2015.
That made very unlikely any quick revival in Iran's oil exports, which are subject to Western sanctions, and removed a potential layer of complication to this week's OPEC meeting.
Ratings agency Fitch said on Tuesday lower oil prices pose the greatest risk to the credit profiles of sovereigns such as Bahrain, Angola, Venezuela and Ecuador, with the least vulnerable being Kuwait, Abu Dhabi, and Norway.