Russia to abandon deal with OPEC on export cuts

Russia, the world's second biggest oil exporter, said it will abandon a deal with OPEC on export cuts, returning supplies to full capacity by the end of June because rising oil prices no longer need its support. Analysts and traders said the decision was a pure formality because although Russia tried to keep a lid on exports in the first two months of 2002 it de facto ignored the deal in March and shipped record volumes.
Russia's Prime Minister Mikhail Kasyanov told after meeting domestic oil firms that Moscow planned to bring its exports to pre-cut levels by the time the arrangement with OPEC expires at the end of June. He gave no exact export forecast from Russia, where oil output is booming for the third consecutive year while domestic consumption is barely increasing. "According to the mutual opinion of the government and oil firms, stabilization of the market is already close," Mr. Kasyanov said.

Oil prices have almost fully recovered since the Sept. 11 attacks on the United States triggered a heavy slide for fear of an economic downturn and are holding above $ 26 per barrel. "In this context we have come to the conclusion that it is time to gradually abandon the reduction that Russia applied to its oil exports," Mr. Kasyanov said. "That means we will return to our normal volumes of oil output and exports to international markets over the next two months."
Russia joined other major non-OPEC producers Norway and Mexico and agreed to cut crude exports by around 5 % or 150,000 bpd from January-June to help the OPEC cartel prop up world oil prices. However, many observers say Moscow has in fact boosted exports in recent months as private oil firms utilised every export gap to bypass the state pipeline monopoly Transneft and ship more crude and oil products abroad.

Steven O'Sullivan from UFG brokerage said the fact that domestic oil prices have recovered to $ 12 per barrel from only $ 5 six weeks ago clearly showed that more oil was leaving Russia in March and April to offset the previous price-crushing glut. He said oil markets already were aware of Russia's non-compliance and that the formal announcement was unlikely to have any fundamental impact on prices.
"In reality markets did not care that extra Russian oil was arriving over the past six if not 10 weeks. The markets are not concerned by extra production, they are concerned that there is enough oil," he said. Mr. O'Sullivan said he did not expect Russian oil exports to jump immediately as major pipelines were already pumping at capacity. "The next big change in volumes will be possible only when new export routes are built in coming years," he said.

Traders also said they envisaged no quick boost in exports. "A slight increase is possible in the third quarter, usually the best quarter in terms of export," a senior Russian trader said.
An industry source said the Energy Ministry had so far planned no extra export allocations so beyond the 5.1 mm barrel quota granted to state oil firms Rosneft and ZarubezhNeft for Mayand June to help fund the closure of a secret base in Cuba used to spy on the United States during the Cold War.

Russia's customs said that crude exports, including deliveries to CIS neighbours, rose 25 % to 3.49 mm per day of crude in the first quarter of 2002 from 2.78 mm bpd in the same period last year. Low-priced exports to CIS nations shot up 535,000 bpd to 680,000 bpd, suggesting more Russian crude was refined by those countries before sale to Western buyers. Exports to non-CIS countries rose by 170,000 bpd to 2.81 mm bpd.