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OPEC frets that other producers might join Russia in scrapping export limits Mexico, Norway and other non-OPEC oil producers might increase production, triggering a collapse in oil prices by The Associated Press
Russia’s decision to remove its cap on oil exports means that OPEC, fearing a possible glut of crude, is sure to avoid raising its own output when its members confer next month, an OPEC official and industry analysts said May 17.
The Organization of Petroleum Exporting Countries fears that Mexico, Norway and other major non-OPEC oil producers might join Russia in ending the export curbs they agreed to set up this year at the cartel’s request.
OPEC members are concerned that the cooperation it struggled to secure from these independent producers might unravel, thereby triggering a collapse in oil prices, the OPEC official said, speaking on condition of anonymity from the group’s headquarters in Vienna, Austria.
Russia, which is not an OPEC member, had agreed to trim its crude exports by 150,000 barrels a day starting Jan. 1, after coming under intense pressure from the group. OPEC wanted Russia to share the burden of a coordinated cut in output before committing to reduce its own production as a means of shoring up sagging prices.
Mexico, Norway, Oman and Angola also participated in the cuts. Russia will phase out limits Noting that oil prices have firmed since late last year, Russian Prime Minister Mikhail Kasyanov said May 17 that his government and Russian oil companies will phase out the limits on Russia’s exports over the next two months. His remarks during a meeting with Russian oil executives were broadcast on Russian television.
The move was not a surprise, and some analysts questioned whether Russia had ever really reduced its exports on Jan. 1 as it promised OPEC it would.
“They didn’t cut in the first place,” said Leo Drollas, chief economist for the Center for Global Energy Studies. He derided Russia’s decision as “a non-announcement of no great consequence to man or beast.”
Oil markets had largely anticipated that Russia would soon stop cooperating with OPEC, he said. July contracts of North Sea Brent crude slipped 4 cents to $26.34 a barrel in London, while U.S. contracts of light sweet crude for June delivery rose 23 cents to $28.18 a barrel in New York. Russia could upset targets Peter Gignoux of Salomon Smith Barney argued that the phase-out of Russia’s export curbs means OPEC will “absolutely” hold back from increasing its production when the group’s oil ministers meet June 26.
Although OPEC pumps about one-third of the world’s oil, Russia has the potential to upset the group’s targets for prices and production.
“I think Russia is going to be a persistent issue for some time,” Gignoux said.
The OPEC official in Vienna said the group would try to persuade Russia to prolong its export cut until the end of July. Others could also increase Given Russia’s announcement, however, the official said OPEC was almost certain to stick with its official daily production level of 21.7 million barrels at its meeting next month.
Other producers are adding to OPEC’s anxiety. Oman has yet to commit to renewing its export cut after the end of June, and Norway has sent “conflicting messages” about its intentions, the OPEC official said.
The United States and other oil-importing countries want OPEC to increase output this summer, arguing that cheaper oil would help a global economic recovery.
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