Russia now decides to give Opec the Finger!
Russia Defies OPEC Call for Deep Output Cuts (Update3)
By Vladimir Todres and Eduard Gismatullin
Moscow, Nov. 23 (Bloomberg) -- Russia defied calls from the Organization of Petroleum Exporting Countries to help prop up oil prices by slashing production, agreeing to a token cut of 0.7 percent. Oil prices slumped 6.5 percent.
The world's second-biggest oil exporter agreed to trim output by 50,000 barrels a day for the rest of the year, after talks between Prime Minister Mikhail Kasyanov and oil executives, said Leonid Fedun, vice president of OAO Lukoil. The government and companies plan to draft 2002 cuts by Dec. 10, he said.
OPEC had asked Russia to cut by as much as 300,000 barrels a day. Otherwise, OPEC said it won't pursue its own reductions, threatening to start a price war. That could help a revival in the world economy. Oil, which fell below $20 last week for the first time since August 1999, plunged as low as $18.60 today.
``The mood of OPEC is that if Russia doesn't come up with the appropriate cuts, they will suspend their own,'' said Lawrence Eagles, head of commodities research at GNI Ltd. in London.
A 20 percent drop in the price of oil adds 0.4 of a percentage point to European economic growth and shaves four-tenths of a point off inflation within a year, Paris-based brokerage Exane estimates. Oil has declined by 30 percent since mid-September.
Brent crude for January settlement recently traded at $19.15 a barrel on London's International Petroleum Exchange, $2.45 above Monday's 26-month low.
Second Attempt
Today was Russian producers' second attempt to come up with a cut that might satisfy OPEC. Two weeks ago, they offered to reduce exports by 30,000 barrels, an amount dismissed by OPEC as insignificant.
OPEC said it would cut 1.5 million barrels a day if rivals trim another 500,000 barrels. Norway offered a reduction of as much as 200,000 barrels a day yesterday, while Mexico said earlier this week it could contribute half as much. Oman said it would also cut production.
Russia, which accounts for about 10 percent of the world's production, derives about one-quarter of its export revenue from oil exports. Exports are at a record high, state-owned pipeline monopoly AO Transneft said earlier this week.
Previous Russian pledges to slash exports and cooperate with OPEC haven't been implemented as promised. In 1998, when crude oil plunged below $10 a barrel, Russia had promised a 200,000 barrels-a- day cut, but increased daily shipments by 32,000 barrels instead.
Lukoil's Fedun said the cut agreed on today was ``a lot'' for Russia, whose Western Siberian oil wells flood with water if production is halted. |
