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Pre-OPEC Saudi, Russia oil meet fails to agree output cut

OPEC: We're concerned about investment

Talks between Saudi Arabia, fellow OPEC member Venezuela and oil powers Russia and Mexico failed to find an agreement to address a growing oil glut on Tuesday, with no side saying they would lower output despite a collapse in prices.

Oil prices turned lower after the meeting, with international benchmark Brent falling more than $1 a barrel to near $78.

In a day of shuttle diplomacy ahead of OPEC's crucial output meeting in Vienna on Thursday, Russian and Mexican energy officials rushed to the Austrian capital to push OPEC kingpin Saudi Arabia on the 30 percent price fall since June.

Read MoreOPEC needs to 'wake up' to shale revolution

Saudi has kept the market guessing about its response to crude's fall, but the meeting on Tuesday led to speculation and hopes in some quarters that Riyadh was considering backing a coordinated cut. Those hopes did not last long.

Venezuelan Foreign Minister Rafael Ramirez told reporters after the meeting that while all sides agreed current prices were "not good" for producing countries, no output cuts could be arranged - or guaranteed at Thursday's OPEC meeting.

Read MoreOil below $79 aheadof OPEC output decision

"We discussed the situation in the market, we shared our points of view, we need to keep in contact and we agreed to meet again in three months," Ramirez, who until recently was oil minister and president of state oil company PDVSA, said.

Venezuela, a noted price hawk, would try for an output agreement within OPEC instead, he said.

What is OPEC?

Igor Sechin, the head of Russian state oil company Rosneft and a close ally of President Vladimir Putin, arrived in Vienna on Tuesday amid hints that Moscow could cut output or exports if the producer group did the same. Russian Energy Minister Alexander Novak also attended the four-country meeting.

Mexican Energy Minister Pedro Joaquin Coldwell left the meeting before the other participants, without giving a statement.

Eyes turn to Thursday

Oil market watchers are divided on the outcome of OPEC's Thursday meeting in the Austrian capital. Predictions range from a large production cut to revive prices, to a small reduction, or none at all.

Current prices are far below what most OPEC members and rival producers such as Russia need to balance their budgets, but the group has struggled to adapt to growing supplies from the U.S. shale boom.

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 increasing a supply glut in the first half of 2015.

Algerian Energy Minister Youcef Yousfi told the official APS news agency on Tuesday that OPEC would seek a "consensual step" to try to bring stability to the oil market, without giving further details.

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 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.

Read MoreWhat happens if OPEC makes no cuts

"Although the objectives of the cartel are unclear today," analysts from Barclays wrote on Tuesday, "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."

Russian diplomacy

In Vienna on Monday and Tuesday, Naimi brushed off reporters' questions about oil prices and surplus supplies. "This is not the first time the market is oversupplied," he said.

Naimi did not speak to reporters after Tuesday's meeting.

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, which have been putting pressure on Saudi Arabia to reduce supplies.

Moscow's relations with OPEC were soured by the country's pledge to cut output in tandem with the group in the early 2000s. Russia failed to follow through, and raised exports instead.

Analysts are sceptical Moscow can offer anything significant this time.

"Russia's overtures to OPEC ... are not particularly credible," analysts from Commerzbank wrote, adding that Western sanctions on Russia made it difficult for the country to increase output anyway.

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 and removed a potential layer of complication to this week's OPEC meeting.