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Friday, 23 November, 2001, 21:59 GMT
Oil's tumultuous week
Brent crude oil graph
London's benchmark crude oil price has completed one of its most dramatic weeks since the Gulf War ended in 1991.

Prices have swung wildly during the week, following each twist in the dispute between the Opec cartel and other leading oil producers.

The Opec cartel has said that it will only take further action to boost oil prices if Norway, Mexico and Russia also cut their oil output.

Prices plunged to a two and a half year low of $16.65 per barrel during Monday's trading session over fears that Opec's promised cuts would not materialise.

But rapid gains saw them bounce briefly above the $20 per barrel after Norway signalled it would support the cartel.

Back in freefall

But prices were in rapid descent on Friday, plummeting by over a dollar, after Russia rejected Opec's wishes.

An agreement by Russia would have been a major political coup for Opec, as it struggles to wield its power on the markets.

Russia's oil firms have agreed to cut production slightly, but the reduction - just 0.8% of overall output - is far less than industry cartel Opec had wanted.

Some had hoped that Russia might reduce output by five times as much.

"It's still not clear what's going to happen," said one broker, "we'll be headline driven for two weeks now until Russia's [next] meeting on 10 December."

Norwegian lead

Norway and Mexico have both already said that they intend to bow to Opec's wishes if their peers do likewise.

But without major participation from Russia, the world's second-biggest oil exporter, Opec's target will almost certainly be missed.

While Opec members have agreed an output reduction of 1.5 million barrel per day, this cut will not be implemented without a total of 500,000 barrels per day from non-member states.

Make or break

For oil producing countries, the current talks are crucial.

Most analysts predict that a prolonged period of low prices unless drastic action is taken.

The Russian government has an interest in higher oil prices, since even a modest rise would add hundreds of millions of dollars to the country's annual tax revenue.

But for Opec, a rise could be even more important.

The cartel's once-undoubted ability to influence the market has been increasingly questioned in recent years, making it all the more important to patch together an effective deal this time around.

 WATCH/LISTEN
 ON THIS STORY
Dimitri Andreev, Moscow oil analyst
"By offering 50,000 barrels cuts Russia does nothing but irritate Opec again"
Wood McKenzie's John Waterlow
"Russia has significant difficulties with the privatised oil industry"
Merrill Lynch's Sue Graham
"Oil in terms of the terms of the economy globally has become far less important over the years"
See also:

23 Nov 01 | Business
Falling oil price hurts stocks
23 Nov 01 | Business
Norway output cut boosts oil price
16 Nov 01 | Business
Russia's threat to Opec deal
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
24 Nov 01 | Media reports
Press questions Russia's oil policy
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