Russia officially lifts tight oil export limit

Russia announced on May 19 that it would gradually reverse a cutback in oil exports despite pressure from OPEC. But analysts reacted calmly to the move, saying Moscow had already flouted the restriction in practice anyway.

In a widely anticipated announcement, Prime Minister Mik-hail Kasyanov said Moscow would restore oil exports within two months to the level they were at before Russia bowed to pressure from the Organization for Petroleum Exporting Countries to introduce restrictions on Jan. 1.

"The situation on the world oil market is almost stabilized and, in view of this, we think the time has come to gradually lift restrictions on our oil exports," Kasyanov was quoted as saying by Russian news agencies.

The process would take effect gradually, he said after holding talks with Russia's oil company bosses.

Moscow agreed to curb its oil exports by 150,000 barrels per day from the start of 2002 in a bid to help OPEC prop up world prices. But since the end of the first quarter it has been paying scant notice to the agreement.

Oil prices fell on May 17 in the wake of Russia's announcement that it was reversing its decision, with reference Brent North Sea crude for June delivery falling $0.18 to $26.20 a barrel in London by early afternoon.

Russia, the world's second-biggest oil exporter, exported 2.97 millions barrels per day from Ja-nuary to March, according to the latest figures, which do not include deliveries to former Soviet repub-lics.

Oil analysts said on May 17 that Kasyanov's announcement had merely put the official seal on an undeclared policy of ignoring the restrictions.

"This confirms the current de facto situation, since Russia has not implemented restrictions since March," said Stephen O'Sullivan, an oil analyst with the Moscow-based United Financial Group brokerage.

This was borne out by the evolution of oil prices on the Russian domestic market, he added.

During the first two months of this year, Russia's home market was flooded with oil as a result of Moscow effectively reducing ex-ports, and domestic prices dropped sharply.

But, starting in March, Russia all but ceased to implement the cuts and as a result domestic prices have soared.

Domestic oil prices "fell as low as $4 per barrel as the crude that was unable to leave the country flooded the domestic market. But this price has now recovered to $12 per barrel, indicating that crude oil export curbs have in effect already been lifted," O'Sullivan said.

An analyst with Renaissance Capital brokerage, Vladislav Metnev, also noted in past weeks "a pick-up in domestic crude prices."

Such was the situation that even OPEC had anticipated Russia's decision to lift export restrictions, said Steve Allen, an analyst with the investment bank Troika Dialog .

"A spokesman for the organization recently said that it would not boost oil output if Russian and other non-OPEC exporters decided to lift their own self-imposed restrictions," he said.

The United States also seemed to anticipate Russia's move, which it is likely to approve.

A top U.S. diplomat said in Moscow on May 15 that Washington welcomed the prospect of a boost in Russia's oil and gas exports.

"I welcome Russia's interest in increasing its production and exports of oil and gas," U.S. Under Secretary of State for the Economy Alan Larson said.