Exclusive: Russia’s Rosneft finds extended oil cuts painful – sources

By Olga Yagova, Olesya Astakhova and Gleb Gorodyankin

MOSCOW (Reuters) – Rosneft does not have enough crude to ship to buyers with which it has long-term supply deals, making it hard for the Russian company to continue with record oil cuts beyond June, four sources familiar with the matter told Reuters on Thursday.

Rosneft has told the energy ministry it would be difficult to maintain cuts to the end of the year, as it has had to cut shipments to major buyers, such as Glencore and Trafigura, despite good demand, two sources close to the talks said on condition of anonymity.

“There is no doubt Rosneft will strictly fulfil all obligations under supply contracts with its foreign and Russian counterparties despite output cuts made by the company as a part of OPEC+ deal,” Rosneft CEO Igor Sechin said in a statement on Friday.

Glencore and Trafigura declined to comment. Russia’s Energy Ministry did not respond to Reuters’ request for comment.

President Vladimir Putin, who decides on oil policy, spoke with Saudi Crown Prince Mohammed bin Salman on Wednesday about “close coordination” on output cuts, agreed in April to tackle oil market weakness because of the coronavirus pandemic.

Saudi Arabia, de facto leader of the Organization of the Petroleum Exporting Countries, proposes to extend the record cuts until December.

“Rosneft is in pain… They must supply refineries, term buyers. There are simply no resources,” a source familiar with Rosneft’s operations told Reuters.

Rosneft, run by one of Putin’s closest allies, Igor Sechin, has long opposed output cuts in tandem with OPEC, but has been overruled by the president, who is keep to deepen political cooperation with the Middle East.

The company, which sells mostly to long-term buyers, has cut output by 17% so far in May versus April, a source familiar with daily output data said.

It will export 800,000 tonnes in 8 cargoes from Baltic ports in June compared to 27 cargoes in April and 13 in May even though buyers wanted more oil as demand recovers in Europe and the value of Russian crude Urals has strengthened.

Glencore, which has a 5-year supply deal with Rosneft, will get two Baltic cargoes in June compared to eight in April. Trafigura will get one compared to ten.

The remaining five June cargoes of Urals were allocated to Total and Gunvor – the winners of Rosneft’s 6-month tender for April-September loading. The volumes are the minimum under tender terms.

Rosneft also exports from the Black Sea and the Pacific and could compensate buyers on those routes or in the Baltic in the future, the sources said.

(Editing by Dmitry Zhdannikov and Barbara Lewis)