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Russia to cut oil exports after OPEC pressure
By Dmitry Zhdannikov
MOSCOW, Dec 5 (Reuters) - Russia took steps on Wednesday to help support world oil prices by agreeing to reduce exports of crude by 150,000 barrels a day from January 1 next year after weeks of pressure from oil cartel OPEC.
The move, a cut of some five percent of current exports of just over three million barrels per day, was taken at a meeting between Prime Minister Mikhail Kasyanov and oil companies.
It was welcomed by Kuwait, reacting for the cartel, and oil prices leapt. But Russia's domestic share market, heavily laden with the stocks of oil producers, rose only slightly. Dealers said the news had been expected.
"Given the current situation, Russian companies consider it possible to carry out a deeper reduction in the export of oil, which will reach 150,000 barrels a day from January 1, 2002," a government spokesman told reporters after the key meeting.
No explanation was given on how the reduction would be made.
Oil prices jumped on the news, with benchmark January crude futures at $20.14 a barrel by 1100 GMT, up 85 cents. But Russia's benchmark RTS share index was up just 0.60 percent at 236.41.
The country had so far offered a reduction of only 50,000 bpd in exports for the fourth quarter of this year, which OPEC had said was not enough for it to trigger deeper cuts.
KUWAIT PLEASED, ECONOMY VULNERABLE
OPEC had told non-OPEC producers Russia, Mexico, Norway and Oman that they must slice a combined 500,000 bpd to trigger a 1.5 million bpd reduction by OPEC from January 1.
"Kuwait welcomes this decision," Kuwaiti Oil Minister Adel al-Subaih told Reuters by telephone. "It will help a lot to reach a collective cuts deal and agreement" between OPEC and non-OPEC. It remained to be seen if non-OPEC will reach the 500,000 bpd target, but Russian analysts saw OPEC as satisfied.
"The size of the export cut offered by Russia today is fully in line with market expectations," said Vladislav Metnev, an analyst at Renaissance Capital investment house.
"While reaction from OPEC is the key thing to watch now, it is most likely the proposed cut will be enough to please OPEC and persuade it to carry out the 1.5 million bpd production reduction in January 2002."
Norway had said it would reduce by between 100,000-200,000 bpd depending on Russia. Oslo is not expected to cut more than Russia. With Mexico having committed to 100,000 bpd and Oman believed likely to do 40,000 bpd, the four look likely to get close. Angola has also said it would consider cuts.
Russia has in the past offered help to OPEC but later carried on pumping as much as it can to get vitally needed oil revenues to help repay its $140 billion foreign debt.
The Russian economy remains very sensitive to changes in the oil price, highlighted by a government official. He said falling oil prices would not lead to a crisis, but could hit growth.
"We think that GDP growth could be not the 3.5 to four percent set in the (2002) budget, but one to two percent," Deputy Economy Minister Arkady Dvorkovich told a conference.
"Inflation could be a little bit higher, not 13 percent but 15-16 percent." He stressed that only 20 percent of Russia's economy depended on oil and added that even if crude was $19-20 per barrel there was no reason for fear. Russia's main export, the Urals blend, is now hovering around $19 per barrel.
The oil talks were attended by Kasyanov, Deputy Prime Minister Viktor Khristenko and Energy Minister Igor Yusufov. The heads of 11 oil companies were also present.
(Additional reporting by Vlasta Demyanenko and Julie Tolkacheva)
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