Skip to main content
The Globe and Mail
Get full access to globeandmail.com
Support quality journalism
Just $1.99 per week for the first 24weeks
Just $1.99 per week for the first 24weeks
The Globe and Mail
Support quality journalism
Get full access to globeandmail.com
Globe and Mail website displayed on various devices
Just$1.99
per week
for the first 24weeks

var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){console.log("scroll");var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))}pencilInit(".js-sub-pencil",!1);

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.

Story continues below advertisement

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 ruble, 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 favour a strong ruble, two sources familiar with the outcome of the meeting said.

“A lot of dollars will come to the market, boosting the ruble, so ‘a ruble barrel’ will become cheaper,” one of the two sources familiar with the outcome said.

The source said a stronger ruble was 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.

Story continues below advertisement

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 ruble rate forecast by nearly 2 rubles 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 neighbour.

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.

Story continues below advertisement

“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.”

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies