Oil Trade Seen Frozen by Drop in Prices

APA trader looking at a television screen during a session at the Moscow Interbank Currency Exchange on Friday.
The country's domestic oil trading session for November delivery is likely to be paralyzed as traders wait for the government to cut the oil export duty to offset falling global oil prices, traders said Friday.

The price for Urals export crude blend has fallen almost 30 percent in northwestern Europe since mid-September. This has been compounded by high export duties and taxes to turn oil exports into loss-making operations.

Russia's oil trading session for domestic deliveries in November is expected to start next week.

TNK-BP is not going to start oil trading until the situation is clearer, a company source said. "Neither we nor other companies are going to trade so far," he said.

"At such prices, we would rather turn off the wells and halt production than trade at a loss," a trader at another west Siberian company said.

Small oil companies called on the government Thursday to cut oil export duties by at least 30 percent, or $110 per ton, following a plunge in global prices, or to face lower production.

Oil trading sources said bigger oil companies were expecting export duties to be cut by $70 to $80 per ton from the current level of $372.2 per ton, set for October and November.

The government has not commented on the requests.

"We have no evidence that the oil export duty will be cut. But we hope it will be lower. We estimate that an appropriate level of the duty would be between $290 and $300 per ton," a Rosneft source said. The domestic oil trading session usually continues for around a week. Up to 3 million tons of crude is sold monthly by small producers and major firms that lack refining capacity.