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UPDATE 2-Weak dollar worries OPEC, Russia irks

Published 09/10/2009, 08:13 AM
Updated 09/10/2009, 08:15 AM
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* OPEC wants U.S. to seek to curb dollar moves

* Lack of Russian output restraint not encouraging

* OPEC investment unlikely to resume until oil higher

(Updates throughout)

By Alex Lawler

VIENNA, Sept 10 (Reuters) - A weak dollar, the currency of the oil market, is a concern for OPEC, and the group needs higher average oil prices to step up investment in new output, its secretary-general said on Thursday.

Abdullah al-Badri, speaking after OPEC at a late night meeting agreed to keep its oil output steady, also said he was "not encouraged" by the lack of tangible cooperation from non-member Russia in reducing supplies.

"The problem is that we are pricing our oil in dollars and most of our member countries have their reserves in dollars," Badri told a news briefing.

"The dollar is really a concern for everybody. I hope President Obama will stabilise this fluctuation, volatility of the dollar."

The Organization of the Petroleum Exporting Countries agreed to lower supplies by a record 4.2 million barrels per day (bpd) last year after demand crumbled in response to the global economic crisis and oil prices crashed.

At the time it called on non-OPEC producers to join in its efforts to bolster the market, but they did not respond.

Russia instead increased its output, which in August reached a record of nearly 10 million bpd, cashing in on OPEC's output cuts.

A courtship begun last year between Russia and OPEC has gone cold and, in contrast to previous OPEC meetings, non-OPEC countries were not invited to attend this week as observers.

"I visited Russia, the Russians came here many times, but we have not seen anything materialise from our talks with them," said Badri. "I'm not really disappointed -- they are not a member of OPEC. It's really not encouraging."

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Russia has proposed a meeting with OPEC member countries in Moscow later this year. Badri indicated he did not expect to attend.

OPEC has warned low prices could slow investment by its members in new supplies needed to meet future demand. Badri said oil, trading near $72 on Thursday, was not yet high enough on an annual average basis to revive investment.

"When I see an average of $75 for the year, then I'm sure member countries will start to invest. But right now, the average price is $52," he said, referring to OPEC's basket of crude oils.

Producers in Russia are maintaining investment plans.

LUKOIL, Russia's biggest private oil producer, will keep its original investment plans for the next two or three years and could expand them if it wins tenders in Iraq, the company said last week. Badri also said OPEC members should adhere more strictly to the supply curbs agreed last year. He said a compliance rate of 80-85 percent was a realistic target.

The group's compliance has been estimated by independent observers to have fallen below 70 percent.

(Editing by Barbara Lewis)

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