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. Last Updated: 07/27/2016

Kasyanov Hints at Ending Export Cut

ReutersMikhail Kasyanov
NEW YORK -- Prime Minister Mikhail Kasyanov said Saturday that Russia is unlikely to stick much longer to voluntary curbs on its oil exports, saying it had no formal commitments to the OPEC group of oil exporters to keep a lid on its shipments.

"We don't have any kinds of commitments or agreements; we are just consulting with [OPEC]," Kasyanov told the World Economic Forum in New York. "We're to a certain extent coordinating [with OPEC]."

Russia, the world's second biggest crude oil exporter, had agreed to cut exports of crude oil by 5 percent, or 150,000 barrels per day, in the first three months of the year. Russia's cooperation with OPEC was key to the cartel's own decision to cut supply from Jan. 1 to counter a steep drop in oil prices on the back of a global economic slowdown. Oil prices have fallen 30 percent since the Sept. 11 attacks on the United States, as a mild U.S. winter and a depressed world economy stifled fuel consumption.

OPEC agreed to cut production by 1.5 million barrels per day from Jan. 1, and persuaded five nonaligned rivals, including Russia, Mexico and Norway, to cut a total of nearly 500,000 bpd more.

Russia has been unexpectedly diligent in keeping its pledge despite a January glut on the domestic market and spare loading capacities, industry sources said.

Traders and officials said firms had actively lobbied for additional loadings in January, but state pipeline monopoly Transneft shipped only under a previously approved Q1 schedule.

"No additional schedules were issued this month. That shows that the government has control over the situation. The loading will be around one-third of the original [reduced] Q1 schedule," an Energy Ministry official said.

Russia in the past has made promises of small cuts in export to OPEC, but never fulfilled its pledges.

The drop in exports has seen a flood of oil in its refineries and pipelines, forcing domestic prices sharply lower and causing a sharp drop in revenues for the government.

To ease the domestic glut, Russia on Thursday moved to reduce export duties on fuel oil.

Kasyanov said Russia would decide on its new energy strategy soon. "One of the targets will be to increase Russia's presence on the energy markets," he said, but added that that would depend on a recovery in the U.S. and European economies.

"We view the current period as temporary, and we're expecting the European and U.S. economies to grow," which would in turn raise demand for Russian oil exports, he said.

OPEC secretary-general Ali Rodriguez said the cartel will not need to make further cuts in production at its meeting in March and could raise output as early as June depending upon the strength of an expected global economic recovery. "The ideal decision, if we maintain cooperation with non-OPEC, is to maintain OPEC's current quota levels," Rodriguez said on the sidelines of the forum.

A senior official from the group's biggest producer, Saudi Arabia, agreed that OPEC, which has cut oil supply four times in 12 months to prop up weak prices, did not need to make further cuts.

"The demand and supply based on what we see now is pretty much in balance. I do not really believe that we need to do very much in March," the Saudi official said.

"For that matter, depending upon [global economic] recovery, we may consider increasing supply," the Saudi official said on condition of anonymity. Any increase would not come at the group's March 15 ministerial conference but possibly in June, he added.