THE price of oil soared to its highest level in almost a month yesterday after Yukos, the embattled Russian oil giant, said it would cut its supply to China.
Yukos, which is struggling to remain afloat in the wake of $7.5 billion (£4.2 billion) in disputed back-tax bills, said it would redirect about one million tonnes of oil, or about 100,000 barrels a day, destined for China.
Oil traders said the decision was evidence a collapse of the oil giant, which accounts for about 2 per cent of global production, was imminent.
In New York, light crude for October delivery was up 56 cents to $46.15 a barrel, while in London the price of Brent crude for November delivery gained 12 cents to $42.57.
Yukos said its oil output would remain constant and unaffected by the cut in exports to China.
Advertisement
The company said from next week it would temporarily suspend a portion of its direct exports to China. The supply cut is expected to continue until the end of the year.
Yukos said the suspension was because of its inability to “continue pre-financing of exports” to China National Petroleum Corporation (CNPC).
Yukos has repeatedly cautioned that it is struggling to pay its oil transportation costs, after the Russian Government froze several of it key bank accounts and prevented it from selling non-core assets.
Yukos said it had notified CNPC of its position last week.
Analysts said they believed the Yukos action was designed to cause diplomatic embarrassment for Vladimir Putin, the Russian President. The action comes less than a week ahead of a planned visit to Moscow by Wen Jiabao, China’s Prime Minister.
Advertisement
Yukos and the Russian Government are locked in a bitter row under which the oil giant has repeatedly given warning that it is facing a Kremlin-instigated bankruptcy. Yukos claims the back-tax bills are politically motivated, and that government actions are preventing it from paying.