Crude Oil Falls After Russia Fails Extend Export Restrictions New York, Feb. 20 (Bloomberg)
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Crude Oil Falls After Russia Fails Extend Export Restrictions
By Mark Shenk
New York, Feb. 20 (Bloomberg) -- Crude oil fell almost 3 percent as Russia's failure to extend export restrictions into the second quarter signaled a possible fight for market share with OPEC.
A meeting today between the Russian government and oil producers ended without any mention of exports beyond March. Traders had expected a decision on second-quarter shipments. Some companies will be raising output this year and have opposed the government's cooperation with OPEC in restricting supply. Reduced output has helped prices gain 21 percent since mid-November.
``A battle between OPEC and Russia over market share has to be coming in the months ahead,'' said Tyler Dann, senior research analyst at Banc of America Securities in Houston. ``Russia is a low-cost competitor,' which hurts OPEC's ability to control prices, he said.
Crude oil for March delivery fell 59 cents, or 2.8 percent, to $20.29 a barrel on the New York Mercantile Exchange. Prices were down 29 percent from this time last year. Excess supply sent oil to a 2 1/2-year low of $16.70 a barrel on Nov. 19.
In London, Brent crude oil for April settlement fell 66 cents, or 3.2 percent, to $19.86 a barrel on the International Petroleum Exchange.
Russia, Norway, Mexico, Oman and Angola agreed in December to help the Organization of Petroleum Exporting Countries reduce crude oil supplies. The five pledged to take 462,500 barrels a day off the market starting Jan. 1, while OPEC promised a 1.5 million- barrel cut. The overall reduction was about 2.5 percent of daily world production.
The oil minister for Qatar, OPEC's smallest producer, said that crude prices would decline without cooperation from non-OPEC producers. Russia is the second-biggest oil exporter after OPEC- member Saudi Arabia.
OPEC Needs Cooperation
OPEC ``alone cannot manage the market,'' Qatar's Abdullah bin Hamad al-Attiyah told reporters in Doha. ``OPEC's share of the market is only 35 percent. Non-OPEC countries' cooperation is very important.''
AO Yukos Oil Co., Russia's second-largest oil producer, has said it plans to boost crude oil production by 20 percent this year. Nikolai Bychkov, vice president for refining and marketing at Yukos, said last month that his company hoped the export limits wouldn't ``last much longer.''
OAO Lukoil, the largest producer, has planned a 2.5 percent rise in production this year. Lukoil was the only Russian producer to support OPEC's plan to reduce world supply.
``There was no decision made to cut exports'' at today's meeting, said Tatyana Razbash, spokeswoman for Prime Minister Mikhail Kasyanov. The minister attended the meeting.
The participants at the meeting expect that it will be necessary to raise oil output if the world economic expansion accelerates later this year, because ``the possible U.S. economic rebound will create higher demand'' for oil, she said.
Demands of the Economy
Lower prices for oil and metals have contributed to a slowdown in Russian economic growth from a record pace in 2000, economists said.
The nation wants to reduce its foreign debt, which stood at $138.1 billion as of Jan. 1, Finance Minister Alexei Kudrin said yesterday.
``The Russians are desperate for foreign exchange, and energy is one of their few sources,'' said Michael Fitzpatrick, a broker at Fimat USA Inc. in New York. ``They are very reluctant to cut any output and would rather let OPEC do the work.''
The Russian government in December promised OPEC that it would lower exports by 150,000 barrels a day, or 5 percent, starting Jan. 1. Even so, the country's oil exports rose in January from December levels, according to the International Energy Agency.
``It has to be damaging to OPEC's psyche to see Russia violate the spirit of the agreement and pick up market share,'' said Dann of Banc of America Securities.
Other Non-OPEC Cuts
OAO Tyumen Oil Co., Russia's third-largest oil company, said in December that Russia's agreement would last at least through March. The government didn't say how long it wanted the export policy to last. Production cutbacks from the other non-OPEC countries were scheduled to last through June.
World oil supply may be discussed during OPEC Secretary- General Ali Rodriguez's Moscow visit in early March or at some other point before April, the Russian Energy Ministry said.
Russia is cooperating with OPEC to support ``fair oil prices'' for both producers and consumers, Energy Minister Igor Yusufov said in a statement on the ministry's Web site. Still, Russia should plan on increasing crude oil output to 1991 levels because ``we have not regained our share of the energy resources market.''
Russia pumped 6.535 million barrels a day in 2000 according to BP Plc's Statistical Review. In 1991, the country produced 9.325 million barrels a day.
Any rise in exports would come with supplies in the U.S., the top oil importer, 10 percent higher than they were a year ago, according to the American Petroleum Institute. |
