Re: [A-List] Re: Frank and Jones -- money and oil

NY Times, November 21, 2001

Russian Oil Production Still Soars, for Better and Worse

By MICHAEL WINES and SABRINA TAVERNISE

MOSCOW, Nov. 20 — While nobody was watching, this country's oil 
producers so dramatically ratcheted up production in the last two 
years that they now occupy a catbird seat, able to whipsaw oil prices 
— and potentially the global economy — just by turning down the 
Russian spigot. 

Trouble is, they only seem to know how to turn the spigot up.

Witness last week's remarkable events. In the space of 10 days, the 
price of a barrel of crude has fallen 20 percent. Saudi Arabia 
beseeched the Russians to cut oil exports, to no avail. OPEC nations 
threatened a price war if Russia did not change its mind, again to no 
avail.

Today the Kremlin had to pare back its 2002 economic forecast, 
principally because of lower oil prices. Meanwhile, the state-owned 
pipeline company, Transneft, trumpeted the opening of a Baltic Sea 
terminal that will flood an already saturated market with another 
240,000 barrels of oil a day.

That is only the beginning. In the next four years alone, according 
to analysts at Deutsche Banc Alex. Brown, huge sums already sunk into 
new pipelines and reinvigorated oilfields should boost Russian oil 
exports by a fifth, to 5.34 million barrels a day.

"There's nothing in there that indicates a willingness to cut back 
either on the part of the oil companies or the government," said 
Thane Gustafson, the top Eurasian expert at Cambridge Energy 
(news/quote) Research Associates in Washington. "If Russia were to 
slam on the brakes now, it would be Ben Hur pulling back suddenly on 
his chariot while it's going full speed ahead."

In that case, other oil-producing nations might have little choice 
but to go along for what could be, at least briefly, a wild ride. 
Prospects for a further plunge in oil prices seemed to ebb a bit 
today as two other big non- OPEC exporters, Norway and Mexico, said 
they would reduce their output in line with OPEC requests.

If, that is, Russia goes along.

Even some Russian oil companies are mulling over a temporary cut in 
exports. But they key word is temporary. No one, including the 
companies themselves, believes that the explosive growth in Russian 
output will be restrained for long, even amid a recession that has 
cut deeply into demand.

full: 
http://www.nytimes.com/2001/11/21/business/worldbusiness/21OIL.html

-- 
Louis Proyect, lnp3@panix.com on 11/21/2001

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