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Tuesday, 20 November, 2001, 16:12 GMT
Hopes for Russia deal with Opec
Yukos oil worker
Russian oil firms may not benefit from an Opec deal
The price of oil has bounced off its lows, as hopes grow that Russia may be closer to doing a deal with Opec.

The price of a barrel of oil on Tuesday was about $18.42, having hit a 29-month low on Monday of below $17 a barrel.

Oil producers' cartel Opec wants Russia and other non-Opec members to cut production to support the market.

Russian Deputy Prime Minister Viktor Khristenko told local news agency Interfax: "The situation on the oil market remains worrying for the Russian leadership... I think further decisions will be understood and set out soon."

Compromise?

Traditionally, oil prices have been shored up by Opec through concerted reductions in the supply of oil.

But last week, Opec refused to do so - unless other non-Opec members agreed to cuts of their own.

Russia has offered to cut production by 30,000 barrels per day, a fraction of the reduction that Opec wants.

"At the end of the day, prices will probably fall low enough to get both sides to... slightly curtail their demands and reach a compromise," Dresdner Kleinwort Benson's oil analyst Mehdi Varzi told the BBC's World Business Report.

"Anything below $16 will begin to cause concern in the Russian oil industry."

Motorist joy

The falling oil prices have brought joy both for motorists and for sectors where fuel consumption is high, for example the airline industry.

The drop has been widely welcomed by companies eager to trim costs at a time of global economic slowdown.

But oil producing countries have sought to balance these concerns with a desire to retain oil earnings.

The drop in oil price has also affected shares in energy firms, with analysts slashing their profit forecasts for UK and European oil firms by one-fifth.

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Dresdner Kleinwort Benson's Mehdi Varzi
"Anything below $16...will begin to cause concern throughout the Russian oil industry"
See also:

16 Nov 01 | Business
Petrol prices set to fall
16 Nov 01 | Business
Russia's threat to Opec deal
15 Nov 01 | Business
Russia defies Opec oil cartel
14 Nov 01 | Business
Opec piles pressure on Russia
13 Nov 01 | Business
Bush boosts oil stocks
12 Nov 01 | Business
Russia declines oil export cuts
08 Nov 01 | Business
Oil jumps amid Opec hopes
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