Russia scraps oil export cap

Russia is the second largest oil exporter in the World

Russia is to ditch the limits that it placed on oil exports at the beginning of the year at the behest of the Opec oil cartel.

Moscow introduced the cap reluctantly after intense pressure from Opec member states, who hoped to push oil prices out of the deep trough into which they had settled following 11 September.

Now, according to Russia's prime minister Mikhail Kasyanov, export levels should be back to normal within two months.

"The situation on oil world markets is almost stabilised and, in view of this, we think that time has come gradually to lift the restrictions," Mr Kasyanov said.

Fait accompli

However, the move is not likely to have a huge long-term effect on prices.

Russia's decision has been widely expected, and traders say that in practice Russian oil firms have been ignoring the cap for some time.

Still, prices slipped on Friday in immediate response to the news, with London's July Brent Crude price down 43 cents on the day at $25.95 by 1330 GMT.

Earlier this week, prices had breached $29 a barrel, marking an eight-month high driven in part by the continuing tensions surrounding the Israeli-Palestinian conflict.

Opec stands firm

Opec members are highly unlikely to ease their own 1.5 million barrel a day output cut at the next scheduled meeting of the cartel in June.

But while Russia agreed limits on exports - totalling 150,000 barrels a day when put side by side with cuts in Norway and Mexico - it did not limit production itself.

The result has been a domestic market swimming in crude oil, pushing prices down to rock-bottom levels.

In response, by March Russian oil firms had widely given up on the curbs even if the government was still formally backing them.

That has pleased senior US diplomats, given the need for cheap oil to sustain the global economic recovery.

"I welcome Russia's interest in increasing its production and exports of oil and gas," said Alan Larson, US under-secretary of state for the economy, on Wednesday.