Oil prices recovered some ground yesterday after plunging around $4 (€4.54) a barrel to fresh two-year lows this week as OPEC raised the stakes in a looming tussle with Russia and other rival producers.
Brent crude futures ended up 47 cents at $17.80 a barrel compared to a closing price of $21.38 last Friday and a peak of $31.05 on September 11th, when hijacked planes attacked the United States.
OPEC fired the first shots of a possible price war when it decided on Wednesday not to cut output unilaterally to rescue flagging prices, unless independent producers reciprocated.
"OPEC has thrown down the gauntlet and the issue now is whether Russia will swiftly curb production," said Mr Lawrence Eagles of GNI Research. If Russia does not respond quickly OPEC will have entered a price war "whether it likes it or not", he added.
But, yesterday, Russian Prime Minister Mr Mikhail Kasyanov, on visiting Madrid, appeared in no mood to compromise. "No one can make any demands of us," the Russian RIA news agency quoted him as saying about OPEC's request for cuts.
However, there were signs that other oil producers might try again to persuade Moscow to trim output.
Mexican Energy Minister Mr Ernesto Martens is expected to travel to Moscow on Monday to hold talks with Russian officials on oil output cuts, a Russian diplomatic source said.
Mexico and Oman are so far the only non-OPEC members to offer substantial oil export cuts to help support world prices. Venezuela's Energy and Mines Minister Mr Alvaro Silva also said he would visit Russia in December to lobby the world's number two producer to join OPEC cuts to strengthen flagging oil prices.
Market confidence this week was initially knocked by the New York plane crash on Monday and reports showing a comfortable cushion of winter fuels across the globe.
But prices took another tumble mid-week as the OPEC cartel meeting in Vienna said it would only make fresh production cuts if major non-cartel producers such as Russia, Mexico and Norway joined the effort to revive the sinking market. Mexico has offered to cut by 100,000 barrels per day, but OPEC has pinpointed Russia, the world's second largest exporter after Saudi Arabia, as key to any agreement.
The 11-member cartel has reduced output three times so far this year, slicing 3.5 million bpd off its production ceiling to keep prices buoyant, as petroleum demand has waned because of the global economic slowdown and stocks have run into surplus.
Now, it says, other producers should help shoulder the burden, especially as non-OPEC supplies have been on the rise.
Kuwait warned on Thursday that oil could once again fall into single digits if non-OPEC producers refused to co-operate with restraints.
