Tuesday June 2, 11:18 AM
UPDATE 1-Russian gas output hits new lows in May
MOSCOW, June 2 (Reuters) - Russia's natural gas production declined further in May as the country cut fuel extraction sharply in response to plunging demand in Europe and at home while oil output held steady.
Energy Ministry data showed on Tuesday natural gas production at Russia's Gazprom, the world's top gas producer, reached new lows in a decade of 0.98 billion cubic metres (bcm) per day, down 14 percent from April and 34 percent from May 2008.
European consumers have been delaying gas purchases since the start of the year, waiting for prices to finally catch up with lower oil prices and switching to alternative fuels or pumping gas from underground storage facilities.
Russian gas consumption also fell as the country entered its first recession in a decade with industrial production recording a double-digit fall in January-April.
Russian natural gas in Europe is priced on oil and refined products with a lag of six to nine month.
Experts expect to see a recovery in demand for gas in the second half of the year when gas prices will be relatively low compared to oil, as they will be set upon low oil prices seen at the end of the last year.
Around 80 percent of Russian gas output comes from Gazprom, which supplies a quarter of Europe's gas. The rest is produced by smaller independent gas firms or oil majors.
Russia's total gas output fell by 12 percent compared to April 2009, the data showed.
Oil extraction in May stood at 9.84 million barrels per day (bpd), unchanged from April 2009, while climbing one percent versus the same month last year.
Last year, the output of the world's second largest oil exporter fell by around one percent and concerns were high that lower oil prices and lagging investments would lead to yet another drop in 2009.
But production volumes have been steady over the past months, while worsening Russia's relations with OPEC as Moscow has snatched some of the group's market share..
Russian pipeline monopoly Transneft's oil exports stood at 4.40 million bpd in May, an increase of 0.6 percent from 4.37 million bpd in April, but 1.4 percent down from 4.46 million bpd in May 2008.
(Editing by James Jukwey) Keywords: RUSSIA OIL/GAS
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