Energy Blast – Dec 18th, 2008

Russia’s lack of support for a cut in oil production is causing problems for OPEC, which has agreed to remove an additional 2.2 million barrels of crude from the market, starting in January.  Russia’s retreat makes Azerbaijan the only non-OPEC nation to offer output cuts.  The news had no effect on the price of oil – ‘only hours after the official communiqué was delivered in Algeria, the price of US Light crude fell to a four-year low of $40 per barrel‘ – potentially because ‘OPEC and other oil-producing countries can’t cut production fast enough to stay ahead of plummeting demand‘.  Russia has ruled out joining OPEC for the present.  Members of the Caspian Pipeline Consortium have agreed to double the pipeline’s capacity, but BP is pulling out, saying that there isn’t enough oil to pump through it.  Russia, Iran and Qatar will meet in Moscow next week to discuss cooperation on gas exports.  Amid repeated threats from Gazprom, Ukrainian President Viktor Yushchenko says his country has already paid back $800 million of its gas debts, but Gazprom is set to warn the EU of the threat posed by Ukraine’s debts.  European governments are supporting drilling for coal bed methane in the hope that it will provide some energy security and reduce dependence on Russia for gas.