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US oil falls as Russia rejects OPEC demands on cut
By Timothy Gardner
NEW YORK, Nov 19 (Reuters) - U.S. crude oil prices briefly sank to a 29-month low on Monday after Russia, the world's second-biggest oil exporter, hinted it would not offer OPEC any more ground in a row over oil production cuts.
OPEC last week said it would boost oil prices with a production cut of 1.5 million barrels per day (bpd) from Jan. 1, but only if non-OPEC producers Russia, Mexico and Norway agreed to cut production by a total of 500,000 bpd. Oil prices have fallen roughly a third since Sept. 11.
So far Mexico has agreed to a 100,000 bpd cut, but Russia has only offered a 30,000 bpd cut. Norway said it was continuing to monitor the market.
The rebuff of OPEC's demands pressured the December crude contract on the New York Mercantile Exchange (NYMEX).
December crude fell to a 29-month low of $16.70 a barrel soon after the market opened and after Russian oil executives and Energy Minister sources took stances that suggested a more substantial cut may not be coming. The contract expired at $17.72.
In London, world benchmark Brent crude futures settled up 26 cents up on the day to $18.05 per barrel after touching a two-and-a-half year low of $16.65 a barrel.
RUSSIA NOT SEEN AGREEING TO DEEPER CUTS
When asked if Russia had offered new output cuts, a Russian Energy Ministry source told Reuters on Monday, "Of course not."
The comments came after talks in Moscow between Mexico's Oil Minister Ernesto Martens and Russia's Oil Minister Igor Yusufov. The source said the subject of the meeting was information exchange between non-OPEC nations.
Russia's oil production is growing at a rate faster than any other major non-OPEC oil country, according to the U.S. Department of Energy.
Russia's recently privatized oil companies balked at the idea of a larger cut. Russia's second largest oil producer YUKOS said economic growth would suffer if it capped production.
And Eugene Shvidlev, the head of Sibneft, Russia's sixth largest oil company, told Reuters, "In terms of production, we are not planning to change anything."
In the United States, shares in Phillips Petroleum and Conoco gained after Phillips made a $15.2 billion bid for Conoco over the weekend. Analysts said the merger, subject to regulatory approval, would offer the new company savings, particularly in energy exploration.
In late trade on the New York Stock Exchange, Phillips shares were 2.62 percent higher at 53.18, while Conoco was up 5.8 percent at $25.71.
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