Russia to cut oil production after all

Nov 23, 2001 01:00 AM

Russia buckled under threats of an oil price war, and prepared to announce significant oil production cuts to bolster falling oil prices. The Russian prime minister, Mikhail Kasyanov, was meeting top oil companies to discuss a decrease in output or export cuts, as part of OPEC's drive to shore up prices because of falling demand.
With less demand for oil because of the world economic slowdown, the OPEC oil cartel has called for production cuts. But its campaign was in danger of being undermined by non-OPEC countries such as Russia, the world's second largest exporter, Norway and Mexico, if they did not fall into line.
Russia previously said it would curtail production by 30,000 bpd, an offer dismissed as pitiful by the oil cartel. In response, OPEC threatened to glut the market with cheap oil in a move that would hurt all producers. But the meeting indicates that Russia is bowing to pressure following the threat of a price war. Russian media reports indicate that Moscow will announce a reduction of 90,000 bpd.

Taking part in the meeting are all Russia's major oil producers, including LUKoil, the top oil company, Yukos, Rosneft, Surgutneftegaz and the Tyumen oil company. World oil prices have been rising in anticipation of the fact that Russia would join other non-OPEC members and line up with the oil cartel.
Russia's deputy prime minister, Viktor Khristenko, has dropped broad hints that Russia is ready to take such action and several oil companies have also said reductions could be made. The Russian climbdown is expected to be dressed up as due to technical factors, with domestic demand rising during the winter, rather than any conscious attempt to help OPEC.
"The oil war is over. Russia hopes that a reduction in exports will be seasonal," it was reported. Government officials were quoted as saying the meeting between Kasyanov and oil companies could result in an output cut announcement of triple the 30,000. "Russia will help OPEC, even if it does not admit it."

Earlier this month, OPEC said it would cut production by 1.5 mm bpd, but only if non-OPEC countries chipped in by curbing production by 500,000 barrels. OPEC has already reduced production by 3.5 mm bpd this year to try and meet oil price targets of $ 22 to $ 28 (£ 16 to £ 20) a barrel. But analysts consider a target of $ 20 to $ 25 (£ 14 to £ 18) more realistic in the current economic conditions. Mexico has already offered a reduction of 100,000 barrels and Norway said it was ready to cut by between 100,000 and 200,000 bpd.

Source: Guardian Unlimited
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