MOSCOW (AP) - Lukoil, Russia's largest privately owned oil company, said Thursday that third-quarter profit rose by 40 percent as the company benefited from soaring oil prices and high refining margins.

Lukoil, which is 20-percent owned by U.S. oil major ConocoPhillips, said net profit for the quarter reached $3.5 billion, up from $2.5 billion for the same period last year.

But the company warned that a worsening economic environment, which has seen oil prices plummet by 70 percent since July, signals a difficult period ahead for oil companies.

"Crude oil prices are now close to the level at which development of many oilfields becomes unprofitable," said Lukoil in a statement. "If the trend lasts, a concern over a shortage of hydrocarbon supply may appear."

Russia is expected to report a small decline in oil production this year, its first annual decline in a decade.