Russian oil price rock bottom as Rosneft leaves Venezuela

RUSSIA / FSU POLITICS - In Brief 02 Apr 2020 by Alex Teddy
On April 2 Russian Urals oil fetched USD 18 per barrel. This is the lowest price for several years. Brent crude is selling at up to USD 36 per barrel. Oil exports from Russia are barely making a profit. Rosneft spend USD 5 to produce and refine a barrel of oil. However, tax, export duty and transport costs are on top of that USD 5. Trump said he expects Russia and Saudi Arabia to reach an agreement on oil production cuts. Trump and Putin discussed the issue on March 31. Low oil prices make US shale oil unprofitable so Trump does not want oil prices to stay rock bottom. On March 28 Rosneft (the Russian state oil company) announced that it has pulled out of Venezuela. Rosneft is run by Igor Sechin who is a confidante of Putin. Rosneft's help is vital for President Maduro of Venezuela. Rosneft is going to sell its assets to the Russian State. On March 30 Roszarubezhneft was founded as a company to deal with foreign oil. This new company will probably be totally state owned and will replace Rosneft in Venezuela. Rosneft will get 9.6% of its share equity from the government in return for its assets in Venezuela assets which is a good deal for Rosneft. Why is Rosneft doing this? Presumably it is trying to get out of sanctions the US imposed on Rosneft Trading in February 2020 and TNK International in March 2020 for dealing with Venezuela. Ditching Venezuela also allows Rosneft to reduce costs. It appears as though the Russian Government is still committed to Maduro.

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