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. Last Updated: 07/27/2016

PM's Oil Cut Offer Seen as Symbolic

Russia's proposed oil export cuts are likely to be "symbolic," a senior Finance Ministry source said Saturday, a day after Moscow announced its willingness to curb supplies to help OPEC support prices.

Prime Minister Mikhail Kasyanov sent crude prices soaring Friday when he said top domestic oil companies were set to propose export cuts, which the government also backed.

"The level of cuts is now under consideration," the source told reporters. "It is going to be symbolic rather than substantial."

OPEC oil ministers are meeting Wednesday in Vienna to decide on cutting exports by up to 1.5 million barrels per day. OPEC wants to boost prices that have fallen on fears of global recession and falling demand.

Russia, the world's second biggest world oil exporter after Saudi Arabia, will attend next week's meeting as an observer.

Crude oil spiked to $22.41 a barrel on the New York Mercantile Exchange, posting a 5 percent gain, on Kasyanov's comments. Benchmark Brent crude December futures stood at $21.38 a barrel Friday.

The source said Moscow wanted more non-OPEC oil-producers to back the cartel's announced move before it would itself opt for big cuts.

"The statement by OPEC on possible oil export cuts should be supported by nonmember countries, otherwise it could be that some will be limiting supply and others lining their pockets from it," the source said.

Speaking on condition that they not be named, executives at several of the biggest Russian oil companies said that they had no plans to cut production, and had not agreed to join a cartel within Russia.

"To limit exports means limiting production, and no one will go for that now," said one oil company representative. Referring to the prime minister's remarks, he said, "This looks like a goodwill gesture for OPEC."

Dmitry Avdeyev, oil analyst at United Financial Group, an investment bank in Moscow, said, "There are a lot of questions about how this would actually work -- the government doesn't have any real ways of forcing private companies to cut."

Avdeyev estimated that oil exports from Russia would rise between 7 percent and 8 percent next year. Crude oil exports from Russia and the other countries of the former Soviet Union account for about one-tenth of world exports.

(Reuters, NYT)