Russia Announces Cut in Oil Exports
MOSCOW – Russia buoyed world petroleum producers with a long-awaited pledge Wednesday to slash oil exports by 150,000 barrels a day as of Jan. 1, amid a push by OPEC to stabilize flailing prices.
The carefully calculated cut by the world's second-largest oil producer was seen as a concession to the international petroleum industry. Analysts said it was unlikely to threaten recent economic growth in Russia, which is almost entirely driven by oil.
The price of Brent crude jumped 50 cents on the International Petroleum Exchange in London at word of the promised cut. The price settled back later in the day to the $19 a barrel range.
Oil prices have plummeted since Sept. 11 amid slumping worldwide demand. Russia's earlier refusal to make big cuts irritated OPEC members and nonmember nations dependent on the industry. Last month, Russia's pledge to cut oil production and exports by 50,000 barrels a day for the rest of the year was criticized as too small to make a difference in prices.
Other oil-producing nations praised Wednesday's promised cut, although no time limit was set and the government did not indicate which companies would cut exports.
The decision was made at a meeting between top government officials and the heads of Russian oil companies. Prime Minister Mikhail Kasyanov said the companies represented — including Lukoil, Surgutneftegaz, Yukos, Tyumen Oil Co. and Sibneft — accounted for 95 percent of Russia's oil exports.
Kasyanov said Russia hoped the cut would help achieve a price of $20 to $25 a barrel and was now "counting on appropriate measures" from other oil-exporting countries. Russia currently produces 7 million barrels a day.
OPEC has agreed to reduce output by 1.5 million barrels a day as of Jan. 1 on condition that non-OPEC members, including Norway, Russia and Mexico, also agree to cuts amounting to 500,000 barrels a day.
Norway already has agreed to reduce production by 100,000 to 200,000 barrels a day, while Mexico has promised to cut its production by 100,000 barrels a day.
Norway's deputy oil minister Brit Skjelbred said Russia's move was "positive" and would help Norway calculate its contribution. Kuwait's oil minister Adel al-Subeih told The Associated Press, "This is a praiseworthy, positive step. It takes us much closer to arriving at an agreement."
The announcement came after weeks of negotiations among OPEC and Russian officials and oil barons, whose companies have been a key stimulant of Russia's economic recovery after a decade of post-Soviet decline. They have been loath to give up market share — even as profit margins fall — and the government has been reluctant to lose tax revenues.
Valery Nesterov, an oil analyst with the Moscow-based Troika brokerage, said the losses would be barely felt in Russia because exports in winter often slump up to 150,000 barrels a day from harsh conditions at oil fields in the arctic and Siberia.
Oil analyst Mehdi Varzi, director of Varzi Energy in London, called it a "positive step signaling Russia is willing to cooperate with OPEC." However, he said the cartel would need to know the time period for the export cut and whether it applies to refined oil products as well as crude.