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Politics : WAR on Terror. Will it engulf the Entire Middle East? -- Ignore unavailable to you. Want to Upgrade?

To: Scoobah who wrote (1503)	1/31/2002 10:15:31 AM
From: Scoobah	Read Replies (1) \| Respond to of 32591

Russian Oil To Flood Markets, Sabotage OPEC Production Cuts 28 January 2002 Summary Rapidly rising oil stocks and falling domestic prices are forcing Russia to work around the recent output cut agreed to by OPEC members and other major producers. Moscow will soon abandon the agreement altogether, flooding the market with both crude and refined products and leading to a prolonged period of depressed oil prices. Large oil consumers like the United States and Europe will benefit at the expense of major oil exporters, particularly OPEC countries. Analysis Russia's second-largest oil company, AO Yukos, plans to boost output by 20 percent this year and is pressuring Moscow to end limits on crude exports, Bloomberg reported Jan. 18. Meanwhile, the domestic price of Russian crude has plummeted to $5.37 per barrel, a drop of almost two-thirds over the past year. The combination of sharply rising stocks and falling domestic prices will force Russia to renege on its pledge to join in an OPEC-led production cut. When it does, both crude and refined products will flood European markets, sending global oil prices into a downward spiral that will deepen if, as is likely, other non-OPEC producers like Norway and Mexico follow suit. The price plunge will bust OPEC's latest attempts to restore oil prices and likely inaugurate a period of depressed prices that could last for years. This will cause real trouble for OPEC producers that rely heavily on oil for national budgets, increasing social and economic tensions from Saudi Arabia to Venezuela. On the other hand, cheaper oil will benefit the manufacturing economies of large oil consumers, including Germany, the United States, South Korea and Japan. Yukos' planned output hike for 2002 comes on top of a 17 percent increase in 2001, which was far more than the company's 2 percent growth in refining capacity. Surgut, another major Russian oil company, also plans to raise output by 14 percent this year. Russia's total output is increasing faster than that of any major oil producer, and by some estimates could exceed that of Saudi Arabia by the end of the decade. President Vladimir Putin has now lowered taxes on oil exports by more than half, meaning oil companies will have that much more capital to put into new production.