Left Menu
Development News Edition

Oil glut, stronger rouble strengthen case for Russia to cut oil output-sources

Oil glut, stronger rouble strengthen case for Russia to cut oil output-sources
Representative image Image Credit: Pixabay

A growing oil glut in Russia and the promise of a flood of dollars from the sale of a leading bank are strengthening the case for Russia to cut oil output in tandem with OPEC, oil sources said. The Organization of the Petroleum Exporting Countries, Russia, and other producers have for more than a year implemented a deal to cut oil output by 2.1 million barrels per day to support the market. The agreement expires at the end of March.

OPEC has recommended extending the output curbs and deepening the combined cuts because of the impact of the new coronavirus in China, which the International Energy Agency said on Thursday would contribute to oil demand falling year on year in the first quarter. The Kremlin has said no decision has been taken yet on whether Russia agrees to extend or deepen the output curbs - the final decision lies with President Vladimir Putin.

But a $38-billion deal under which the finance ministry will buy state lender Sberbank is due to start in April and promises to swell state coffers, with Russia using a big chunk of its dollar national wealth fund to the central bank's stake. This is expected to lead to a stronger rouble, which is a factor that is generally disliked by oil exporters as it hits their profits.

At a meeting on Wednesday, oil companies asked Energy Minister Alexander Novak to tell central bank governor Elvira Nabiullina that they do not favor a strong rouble, two sources familiar with the outcome of the meeting said. "A lot of dollars will come to the market, boosting the rouble, so 'a rouble barrel' will become cheaper," one of the two sources familiar with the outcome said.

The source said a stronger rouble as an "important factor" in the decision on whether to deepen cuts in what is known as the OPEC+ deal following a proposal by its partners in the agreement to add another 600,000 bpd to the combined cuts. Both sources said that two Russian oil companies, Surgutneftegaz and Zarubezhneft, in particular, had raised the exchange rate issue.

The companies, the energy ministry, and the central bank did not reply to Reuters' requests for comments. A number of oil executives, after leaving the energy ministry on Wednesday, told reporters that no final decision had been taken but the basic scenario was to extend the existing OPEC+ deal to end-June.

Nabiullina said on Thursday she did not expect a "significant" impact on the money market from Sberbank's sale although the economy ministry has raised its rouble rate forecast by nearly 2 roubles to 63.9 per U.S. dollar for this year. BELARUS AND MAINTENANCE FACTORS

Another factor in Russia's decision is a disagreement with Belarus under which Moscow has halted its 240,000 bpd supply of oil to its neighbor. In addition to this, the number of Russian oil refineries undergoing maintenance will peak in April-May, according to energy ministry data and Reuters calculations, freeing up another up to 580,000 bpd of oil.

Russia is reallocating oil flows meant for Belarus to other destinations but the upcoming peak in maintenance means it will be flooded with crude, an oil trader told Reuters. "A decision on (resumption of supplies to Belarus) should be taken in early March," the oil trader said. "We can add a couple more cargoes on the Baltic (ports) but it is not possible to add more."

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

Download The Devdiscourse News App for Latest News.



Top 10 Fake News, Myths and Realities on 2019 Novel Coronavirus COVID 19

With nearly 1500 deaths by January 14 and around 65,000 infections in China, the Novel Coronavirus 2019 has become one of the worst health epidemics of the 21st Century. However, 8,573 people have been cured but the rumor mongers are a...

Handling fake news Infodemic in time of Coronavirus epidemic

Social media has provided a platform where everybody can disseminate his her views without any supervision. Its excellent if the message is genuine but misinformation is equally disastrous. Health is such a topic where every Tom and Harry c...

Sentiment Analysis on Budget 2020: Long shot for solution to economic worries?

Industries and individuals alike had high expectations from the government to take tangible steps but the budget 2020 seems to have failed expectations....

How can technology help the future of mobility?

More than a billion people or one-third of the global rural population lacked access to all-season roads and transport services in 2016, subsequently hindering the socio-economic development....


Latest News

Blues-Ducks postponed game rescheduled for March 11

The St. Louis Blues postponed game against the host Anaheim Ducks will be played March 11. The NHL on Sunday announced the schedule change for the game that initially was postponed after Blues defenseman Jay Bouwmeester collapsed on the ben...

UPDATE 3-Turkey says two killed in car bomb attack near Syria border

A car bomb attack by the Kurdish YPG militia killed two people and wounded five on Sunday in the northeastern Syrian town of Tel Abyad, near the Turkish border, the Turkish Defence Ministry said in a statement.The Arab town, from which Turk...

UPDATE 1-Golf-Scott wins by two strokes at Riviera, and this time it is official

Fifteen years after his first victory at Riviera, Adam Scott won the Genesis Open in Los Angeles on Sunday, and this time his victory is official.The elegant Australian overcame an early double-bogey to shoot one-under-par 70 and triumph by...

UPDATE 3-Virus spreads on cruise ship in Japan, U.S. passengers flying home

Hundreds of passengers were preparing to be evacuated from a cruise ship on Sunday after spending two weeks under quarantine off Japan over the coronavirus, with Americans flying home on chartered evacuation planes early Monday morning. Sev...

Give Feedback