(This May 25 story has been corrected to remove the reference in paragraphs 1 and 4 to the OPEC discussions triggered by Trump's Tweet)
By Katya Golubkova, Dmitry Zhdannikov and Rania El Gamal
ST PETERSBURG / DUBAI (Reuters) – Saudi Arabia and Russia are discussing increasing OPEC and non-OPEC oil production by around 1 million barrels a day, sources said weeks after US President Donald Trump complained about artificially high prices.
Riyadh and Moscow are ready to ease cuts in production to reassure consumers about the adequacy of supplies, their energy ministers said Friday. Saudi Arabia's Khalid al-Falih added that such steps would be gradual so as not to shock the market.
An increase in production would result in severe supply dampening for 17 months as fears arose that a price rally had gone too far and the oil price peaked at $ 80.50 a barrel since the end of 2014.
Trump tweeted last month that OPEC had "artificially" raised oil prices.
"We were at the Jeddah meeting when we read the tweet," said OPEC General Secretary Mohammad Barkindo, referring to a meeting in Saudi Arabia on April 20.
"I think I was urged by His Excellency Khalid Al-Falih that we probably had to respond, we in OPEC are always proud of ourselves as friends of the United States," Barkindo said before a panel discussion with the Saudi and Russian Energy Ministers in St. Petersburg at Russia's most important economic forum.
OPEC officials said "the need to answer" Barkindo referred to a tweet he sent the same day rather than the need to act.
The Organization of Petroleum Exporting Countries and Russia's Allies have agreed to cut production by 1.8 million barrels per day (bpd) by 2018 in order to reduce global stocks.
In April, the pact's participants cut production by 52 percent more than necessary, with declining production from troubled Venezuela helping OPEC achieve a larger reduction than planned.
Sources familiar with the matter said that an increase of about 1 million barrels a day would lower compliance to 100 percent of the agreed level.
Barkindo also said that it was not uncommon for the US to put pressure on OPEC, as some US energy secretaries had asked the producer group to lower prices in the past.
Oil prices tumbled more than two percent to $ 77 a barrel on Friday, as Saudi Arabia and Russia said they were ready to ease supply cuts.
NEAR THE TARGET
Russian Energy Minister Alexander Novak said that the current cuts were actually 2.7 million barrels a day as Venezuelan production declined – about 1 million barrels above the originally agreed cuts ,
However, Novak declined to say whether OPEC and Russia would decide at its next meeting in June to increase production by 1 million barrels a day.
"There comes a moment when we should consider how we can take the agreement very seriously and gradually relax the quotas for production cuts," Novak said in television commentary.
Initial talks are being held with the energy ministers of OPEC countries Saudi Arabia and Russia in St. Petersburg this week, along with their counterpart from the United Arab Emirates holding this year's OPEC presidency.
OPEC and non-OPEC ministers will meet in Vienna from 22 to 23 June, and the final decision will be taken there.
Current Discussions Underway Sources said that production cuts were at record levels to calm the market after oil hit $ 80 a barrel amid concerns over a supply bottleneck.
China has also expressed concerns about whether enough oil will be pumped, a statement said in a Saudi statement after energy secretary Falih called the Chinese energy chief on Friday to discuss cooperation between their countries and review the oil market.
Only Bekri, administrator of China's National Energy Administration, said to Falih that he hopes Saudi Arabia "can take further substantive action to ensure a sufficient supply of crude oil," the Saudi Ministry of Energy said.
While Russia and OPEC are benefiting from higher oil prices, which have risen nearly 20 percent since the end of last year, their voluntary production cuts have opened the door to other producers, such as the US shale sector, to boost production and market growth conquer share.
The final production number has not yet been determined, as splitting the additional barrels among the deal participants could be difficult, the sources said.
"The talks should now bring compliance to 100 percent, more for OPEC than for non-OPEC," said one source.
OPEC may decide to increase oil production in June due to concerns over Iranian and Venezuelan supply, and after Washington expressed concern that the oil rally is going too far, OPEC and the oil industry told Reuters on Tuesday.
However, it is unclear which countries will be able to increase production and close another supply gap than oil producers in Gulf, led by Saudi Arabia and Russia.
"Few members have the capacity to increase production, so implementation is complicated," said an OPEC source.
So far, OPEC has stated that it does not see any need to ease production restrictions, although consuming countries expressed concerns that the price rally could undermine demand.
The rapid decline in oil stocks and concern over deliveries following the US withdrawal from the international nuclear deal with Iran and the collapse of production in Venezuela were behind OPEC's rethink.
Additional coverage by Olesya Astakhova, Alex Lawler, Vladimir Soldatkin and Katie Paul; Letter from Dale Hudson; Editing by Adrian Croft and Edmund Blair