Russia's largest oil producer, Rosneft, is struggling to supply its long-term buyers with crude oil as it has to cut output due to the OPEC+ deal and will find it hard to keep the current cuts through the end of 2020, as Saudi Arabia is reportedly proposing, Reuters reported on Thursday, quoting sources with knowledge of the matter.
"Rosneft is in pain... They must supply refineries, term buyers. There are simply no resources," one source with knowledge of the company's operations told Reuters.
This 'pain' for Rosneft may tip the scales in favor of Russia not agreeing to extend the current deep cuts through 2020 - as Saudi Arabia is reportedly suggesting - rather than easing those cuts after June, as per the current OPEC+ deal.
Oil executives in Russia, including Rosneft's chief executive Igor Sechin, have often criticized the OPEC+ pact, which began its efforts to fix the market and prop up prices in January 2017. Russian firms have argued that the OPEC+ cuts only serve to prop up U.S. shale production with higher oil prices, giving America more share on the global market at the expense of Russia and its OPEC allies in the OPEC+ deal.
Earlier this week, Russia's Energy Minister Alexander Novak discussed with oil executives the possible extension of the current oil production cuts beyond June.
According to a source familiar with the details of the meeting who spoke to Reuters, Russia's oil companies failed to reach an agreement at the Tuesday meeting, as half the firms supported the extension of the current cuts-which means Russia cutting production from around 11 million bpd to 8.5 million bpd-while the other half of the oil executives were against extending the deep cuts and calling for the easing of the cuts, as per the OPEC+ agreement.
Russia plans to stick to the OPEC+ deal reached in April and ease the cuts after June 30, Russian officials and industry sources told Bloomberg on Wednesday.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More