Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Yusufov: Crude Prices Too High

APEnergy Minister Igor Yusufov
Russia, the world's second-largest oil exporter, said Friday that oil cartel OPEC was wrong to keep oil prices as high as $28 per barrel and insisted that Moscow would continue to boost output.

"We have a disagreement with OPEC as we believe that prices above $25 per barrel are hurting consumers, while they consider a price of $28 a normal one," Energy Minister Igor Yusufov told a news conference.

"As far as concrete steps [of cutting production] are concerned, it is a burden for us. If we shut down oil wells, it takes us from three to six months to reopen them. Our strategy is to increase output volumes smoothly and preserve prices," he said.

Oil prices have surged more than 20 percent in the two weeks since the Organization of the Petroleum-Exporting Countries' decision last month to cut oil production by 3.5 percent from Nov. 1. International benchmark Brent crude jumped another dollar on Friday to trade at $31.50 per barrel, its highest level since the Iraq war.

While OPEC has a target range of $22 to $28 per barrel for its basket of crude oils, Russia has said it prefers crude prices of between $20 and $25 per barrel.

The Energy Ministry comments come as a surprise only a month after Russia signed a market pact on closer cooperation with OPEC heavyweight Saudi Arabia. And President Vladimir Putin said shortly after OPEC's decision to cut that Russia had the means to curb exports if it was unhappy with oil prices.

Earlier Friday, OPEC president Abdullah bin Hamad al-Attiyah told reporters in Tokyo that Russia had given the group "very strong commitments" to cooperate and that the Russians were "absolutely" not interested in seeing prices fall.

Analysts said Russia had little room for maneuver in its ability to cut exports, as it would face criticism from private majors, including Western giants now investing in Russia. Nor, they said, was it able to do much in terms of raising supplies, as it had no spare export capacity.

"I think Yusufov's comment is a response to several OPEC calls that any other supply cut by the cartel should be done in tandem with independent producers," Valery Nesterov from Troika Dialog said.

He said Russia was interested in maintaining its image as one of the fastest-growing oil areas in the world in order to attract more foreign direct investment.

"Any move to reduce exports would damage Russia's attractiveness for international oil majors," Nesterov said.

Paul Collison, senior energy analyst at Brunswick, said, "It's only two days ago that a senior OPEC member said that by December when next meeting, they really want to increase focus on Russia and other non-OPEC producers to start cuts.

"Over the next 18 months this could be a really big issue, especially as Iraq starts to ramp up output next year. That's going to put much more pressure on OPEC. Mainly this is Yusufov responding to new calls. Oil is now at over $30. That's just simply too high, with that price it's going to risk global economic recovery. Russia is just not going to cooperate. This could be the first sign that pressure is increasing."

OPEC's decision to slash oil output by 900,000 barrels per day starting in November will keep crude prices high this fall, but burgeoning Iraqi and Russian exports could force the cartel to cut deeper when demand ebbs next spring, the Paris-headquartered International Energy Agency said Friday.

The desire of some OPEC members to increase their production quotas will add to pressure on the cartel in the second quarter of 2004, when oil consumption hits a seasonal low.

Firm crude prices will encourage Russia and other independent producers to pump more oil to maximize their revenues.

To avoid a supply glut, OPEC will have to pump less, giving up some of its market share for the fifth consecutive year, the IEA said.

If OPEC refuses to reduce its output in the face of falling demand, prices will sink beneath the weight of surplus crude.

"Difficult decisions lie ahead," the IEA said in its monthly oil market report.

Iraq's postwar production is recovering more quickly than many analysts had expected. Iraq pumped an additional 380,000 barrels per day in September, whereas OPEC, which includes Iraq among its 11 members, boosted its overall production by just 90,000 barrels per day, the IEA said.

(Reuters, AP, MT)