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U.S. oil jumps as Russia mulls deeper cuts
By Timothy Gardner

NEW YORK, Nov 27 (Reuters) - U.S. crude oil prices leaped 4 percent on Tuesday after Russia said it would soon consider making big enough production cuts to fall in line with oil cartel OPEC's efforts to raise global oil prices.

Prices trimmed gains in after-hours trade after industry group the American Petroleum Institute (API) said U.S. stocks of gasoline and heating oil swelled sharply last week.

Temperatures heading into winter have been milder than normal so far this year, reducing demand for heating fuel, while gasoline demand for last week's Thanksgiving holiday fell below expectations, analysts said.

NYMEX January crude fell 27 cents to $19.21 after the API report, having settled 79 cents stronger at $19.48 per barrel in normal hours.

Regular session gains came as Russia, the world's second largest oil exporter, said it would next month consider bigger cuts than the 50,000 barrels per day (bpd) Moscow has currently offered.

Oil cartel OPEC agreed this month to cut 1.5 million bpd from the 76 million bpd global oil market from Jan. 1, but only if non-OPEC producers agree to a 500,000 bpd cut.

Non-OPEC Mexico has agreed to 100,000 bpd, while Norway has offered up to 200,000 bpd and OPEC wants Russia to make cuts of a similar magnitude.

Viktor Khristenko, Russia's Deputy Prime Minister said his commission would meet in December after the government and Russian oil companies agree on measures to make deeper cuts from Jan. 2002.

Analysts debated just how much control the Russian government has over Russian oil companies eager to take advantage of their country's growing production. Last year alone, Russia's oil production rose six percent and is now more than 6.5 million bpd.

"The Russian government can't legally force companies to cut production," said Jay Saunders, global oil analyst at Deutsche Bank Alex Brown. "Russian oil companies have strong growth plans. They've invested in port expansions, so they are going to want to fill the pipelines and the ports."

The Russian government does have some control, countered other analysts.

"They have some sway over production," said Roger Diwan, an analyst with Petroleum Finance Co. in Washington, D.C. "They can tax oil companies and they can reduce flow on the Transneft pipeline."

Transneft, the Russian state oil pipeline monopoly, scheduled an over 15 percent preliminary reduction in December exports from a Black Sea port that usually exports about 880,000 bpd, market sources said on Monday. But the pipeline's capacity normally falls during winter and that cut would be a minuscule portion of Russia's production.

Non-OPEC Norway, the world's third-largest exporter after Saudi Arabia and Russia, also helped boost prices on Tuesday. Olso's oil minister said he wanted talks with Russia and hoped Moscow would take steps to support the price.

Bigger price gains were erased when diplomats at the United Nations in New York said Russia and the United States had agreed informally to a simple six-month extension of the U.N.'s oil-for-food exchange system with Iraq when the current program expires at the end of this week.

Washington had proposed an extension of the 11-year-old embargo against Iraq, including oil-for-food, for four months to the end of March, with the proviso the Security Council commit to a revision of sanctions by then.

Iraq's UN envoy had said Baghdad would not accept anything other than a simple six-month extension, threatening Iraqi oil sales of two million barrels a day, four percent of world exports.

The U.N. Security Council is due to vote on the issue on Friday.

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