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Yukos to cut supplies to china Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=a4CCk2HumaBs&refer=homehttp://quote.bloomberg.com/apps/news?pid=10000006&sid=a4CCk2HumaBs&refer=home
Crude Reaches 4-Week High; Yukos to Cut Supply to China's CNPC
Sept. 20 (Bloomberg) -- Crude futures rose to a four-week high after OAO Yukos Oil Co. said it will halt shipments to China's biggest oil company, the first time a tax dispute has disrupted exports from Russia, the world's largest oil producer.
Yukos will end supplies to China National Petroleum Corp. of about 95,000 barrels a day tomorrow, Yukos's China representative said. Russia froze the company's bank accounts amid demands for billions of dollars in back taxes, leading Yukos to warn it might cut exports at least six times since July. Yukos can't pay railway bills and European buyers may also face cuts.
``The Yukos situation is worrying because they are interrupting shipments to the world's fastest-growing energy market,'' said Renzo Mejia of Sucden (U.K.) Ltd., a London futures brokerage. ``The actual effect on supplies isn't insignificant because it could be repeated elsewhere.''
Crude oil for October delivery jumped as much as 1.7 percent to $46.35 a barrel, its highest since Aug. 23, and was up 35 cents at $45.94 in electronic trading on the New York Mercantile Exchange at 12:22 p.m. London time. It has gained 41 percent this year. Brent crude for November settlement rose 21 cents to $42.66 a barrel on London's International Petroleum Exchange.
Back Taxes
A $7.5 billion bill for taxes and penalties for 2000 and 2001 threatens to bankrupt Yukos, Russia's biggest oil exporter. The company's warnings of reduced shipments have prompted the Russian government to say Yukos has access to enough funds to pay for transport of its oil. President Vladimir Putin has repeatedly said Russia's oil exports won't be affected.
An output warning from Yukos last month contributed to a surge in crude futures to a record $49.40 a barrel in New York, amid concern attacks on Iraqi pipelines and other supply disruptions would cut oil availability by more than the spare production capacity held by the Organization of Petroleum Exporting Countries. Prices have slid 7 percent since.
``They're stopping 100,000 barrels a day to China because they can't pay rail charges, which is the first real disruption from Yukos,'' said Deborah White, a commodities economist at Societe Generale in Paris. ``It seems to us they could easily get the customer to pay for the rail shipments, but perhaps Yukos wants a disruption,'' to make a point, she said.
Russian and Chinese Premiers Mikhail Fradkov and Wen Jiabao will meet in Moscow on Sept. 23 to Sept. 25. The talks between Russia and China may help persuade Russia to build an oil pipeline to China as part of a planned link from Siberia to the Pacific Ocean. China will use an average of 6.36 million barrels of crude a day this year.
Selling Less
Moscow-based Yukos plans to pump an average of 1.72 million barrels a day of crude this year. The company usually exports about 37 million barrels a month, or 1.23 million barrels a day of crude oil to all destinations, said Sergei Prisyazhniuk, Yukos's China representative.
Cutting exports will reduce Yukos's deliveries to China this year to some 5 million tons of crude (100,000 barrels a day) from an originally planned 6 million tons, a Yukos official, who declined to be identified, said in Moscow.
``The market will be nervous again, because China will have to source those cargoes from somewhere else and that's going to put pressure on prices,'' Sucden's Mejia said. The export cut ``doesn't fare well for Russia's government either.''
Yukos had planned to sell CNPC 400,000 tons a month through October and 250,000 tons a month for the last two months of the year, the official said. Yukos made its decision as a payment to the railways came due, he said, denying the cut was timed to coincide with the Russian-Chinese summit.
Yukos's shipments of 250,000 tons a month to China Petrochemical Corp. won't be affected, Prisyazhniuk said.
Hurricane Effect
Oil prices gained Thursday and Friday on concern Hurricane Ivan's disruptions to output and imports would result in the eighth consecutive weekly decline of crude inventories in the U.S., the world's largest oil consumer.
Societe Generale's White expects crude oil inventories to have fallen 7.2 million barrels last week, exceeding a drop of 7.1 million barrels in the previous week. The hurricane reduced U.S. oil output by at least 5.1 million barrels last week, according to the U.S. Minerals Management Service. It shut down at least a sixth of refining capacity along the Gulf of Mexico.
Friday's gain pushed New York prices above the Sept. 2 high of $45.37 a barrel, which had acted as a ceiling for some traders who analyze price charts, Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut, said in a daily report.
``That puts prices back in a near-term upward trend, and it makes it likely from a chart perspective that we will see another challenge to $50 crude,'' Beutel said. ``We just need two and a little more than half days with gains as large as Friday's.''
Ivan tore oil and gas platforms and rigs from their moorings in the Gulf of Mexico last week before dissipating over Alabama. Another storm, Jeanne, was moving out into open waters after passing over some Caribbean islands last week. No other Atlantic storms were expected to reach oil or gas installations this week.
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