Russia agrees to cut oil production, diesel continues fall

| Tuesday, November 27, 2001

Oil prices fell heavily late last week after Russia announced it would trim production by 50,000 barrels per day (bpd) in the fourth quarter and hold talks in early December about further cuts after the first of the year. The announcement comes as oil prices continue to fizzle.

The Organization of Petroleum Exporting Countries, which has already chopped 3.5 million bpd from output limits this year, wants to trim production again to compensate for a drop in petroleum demand because of the worldwide economic slowdown.

OPEC agreed earlier this month to curb output by 1.5 million bpd in January, if non-OPEC producers, such as Mexico, Norway and Russia, agreed to trim output by a total of 500,000 bpd.

Mexico has since announced that it would cut oil exports by up to 100,000 bpd and Norway has offered to cut production by between 100,000 and 200,000 bpd. As of now, the proposed cuts leave OPEC well shy of its 500,000-bpd goal for the three nations.

The market had expected bigger cuts from Russia, the world's second biggest producer, following offers of fairly substantial reductions from Norway and Mexico. A spokesman for the oil cartel over the weekend called Russia's offer "too little," but said it was encouraging that Moscow would review the decision in December.

The weekly retail on-highway diesel prices released by the Energy Department Monday show the national average cost of diesel is the lowest it has been since September 1999. Diesel has plummeted about 31 cents since the Sept. 11 attacks to $1.223.

The biggest price plunge from last week was in the state of California. Diesel there dropped about 4 cents per gallon to $1.339 - still the most expensive in the nation. Fuel in the New England region also sells for $1.339, down about 2.5 cents from a week ago.

The lowest prices in the nation are once again found in the Lower Atlantic region. Fuel there dipped 2.6 cents to $1.163 per gallon.

The remaining regions' price per gallon is as follows: East Coast, $1.215; Central Atlantic, $1.31; Midwest, $1.23; Gulf Coast, $1.164; Rocky Mountain, $1.259; and West Coast, $1.303, respectively.

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