Russia declines oil export cuts

Opec wants non-members to cut output and exports

Russia has resisted calls to cut its oil exports and play ball with the Opec cartel of oil producing countries.

Instead the country has only agreed to what analysts called a "symbolic and short-term" 30,000 barrels a day cut in production.

The Organisation of the Petroleum Exporting Countries (Opec) wants both its member countries and non-Opec oil producing countries to cut oil output in a bid to bolster international crude oil prices.

Norway, another main non-Opec oil exporter, on Friday said it would not cut exports, even though crude oil prices have fallen about 30% since 11 September.

Mexico, a third major exporter has also held off from making promises, although Venezuela's energy and mines minister Alvaro Silva Calderon said Mexico has offered assurances that it would continue cooperating with Opec.

Russian pressure

To get Russia on-board, the Saudi oil minister Ali al-Naim went to Moscow on Monday to discuss the matter with vice-Prime Minister Viktor Khristenko.

Mr Silva will insist on non-Opec cooperation

"We believe it expedient to continue consultations with Opec on questions of pricing, investment and environment," said Mr Khristenko after the meeting.

But Russia's only practical response was to agree to the 30,000 barrels a day cut in production, which is about 0.43% of Russia's daily output of almost seven million barrels per day.

The cut was reportedly accompanied by an agreement to freeze exports at current levels of about three million barrels per day until the market recovers.

Even this, said analysts, amounted to little since domestic demand for oil is expected to rise sharply during the cold winter, and this rise would help soak up any surplus production by Russia.

Major cut

Russia's reluctance to cut exports should be seen against a background of its desperate financial situation.

With $140bn in foreign debts, the country is in desperate need of foreign cash, so it tends to export as much as it possibly can.

Indeed, the country's output cut appears insignificant when compared with Opec's own intention of cutting output by up to 19% when it meets on 14 November.

"[Opec is] considering a cut in production of a minimum of one million barrels per day up to one and a half million," Mr Silva said.

"We will insist on non-Opec cooperation."

Critics

Opec's efforts to lift oil prices have been widely criticised by non-Opec players who feel more expensive fuel could be damaging to economic growth.

"In a period when the global economy is on the brink of recession, price effects become much more significant," said Klaus Reehag of the International Energy Agency (IEA) in Paris.

"The last thing you want to do is push demand down. It is already weak enough, but that's the danger we are seeing."

Demand has in fact fallen already, despite the lower prices, the IEA said in its monthly report.

Demand for oil fell 1% or 750,000 barrels per day during the third quarter of 2001 to 75.7m barrels per day.

"Early indications of oil products deliveries for September confirm expectations of a downturn in global oil demand, as the already ailing economy of the United States and the rest of the world deteriorates in the wake of the terrorist attacks on the United States," the report said.