Exclusive: Russia’s Rosneft finds extensive oil cuts painful

By Olga Yagova, Olesya Astakhova and Gleb Gorodyankin

MOSCOW (Reuters) – Rosneft does not have enough crude oil to deliver to buyers with whom it has long-term supply agreements, making it difficult for the Russian company to continue record oil cuts beyond June, four people familiar with the matter said Reuters sources with Thursday.

Rosneft has informed the Department of Energy that it will be difficult to maintain the cuts until the end of the year because deliveries to bulk buyers such as Glencore and Trafigura have had to be cut despite good demand, as two sources close to the talks said on condition of anonymity .

Glencore and Trafigura declined to comment. Rosneft and the Russian Ministry of Energy did not respond to Reuters’ request for comment.

President Vladimir Putin, who decides on oil policy, spoke to Saudi Crown Prince Mohammed bin Salman on Wednesday about “closely coordinating” the cuts in production. In April, he agreed to combat the weakness in the oil market due to the coronavirus pandemic.

Saudi Arabia, de facto chairman of the Organization of Petroleum Exporting Countries, is proposing to extend the record cuts to December.

“Rosneft is in pain … you have to supply refineries, forward buyers. There are simply no resources,” a source familiar with Rosneft’s business told Reuters.

Rosneft, led by one of Putin’s closest allies, Igor Sechin, has long spoken out against cuts in production with OPEC, but was overruled by the president, who wants to further deepen political cooperation with the Middle East.

The company, which mainly sells to long-term buyers, cut production by 17% in May compared to April, according to a source familiar with daily production data.

In June, 800,000 tons are exported in 8 loads from Baltic ports, compared to 27 loads in April and 13 in May, although buyers wanted more oil as demand in Europe recovered and the value of the Russian Rohural Urals increased.

Glencore, which has a 5-year supply contract with Rosneft, will receive two Baltic loads in June, compared to eight in April. Trafigura receives one compared to ten.

The remaining five Ural loads in June were allocated to Total and Gunvor – the winners of Rosneft’s 6-month invitation to load from April to September. The quantities are the minimum under tendering conditions.

Rosneft also exports from the Black Sea and the Pacific and could in future compensate buyers on these routes or in the Baltic Sea.

(Editing by Dmitry Zhdannikov and Barbara Lewis)

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