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EXCLUSIVE-Russia accepts need for oil cuts, bargains with Saudi on details - sources

Thu 29th November, 2018 11:58am
* Russian firms insist on small, gradual reduction
    * Saudi Arabia says will not cut alone
    * Riyadh under pressure from Trump to lower oil prices
    * Putin to meet Saudi crown prince this week

    By Dmitry Zhdannikov and Olesya Astakhova
    LONDON/MOSCOW, Nov 29 (Reuters) - Russia is becoming
increasingly convinced it needs to reduce oil output in tandem
with OPEC but is still bargaining with the producer group's
leader, Saudi Arabia, over the timing and volume of any
reduction, two industry sources told Reuters.
    The Russian Energy Ministry held a meeting with the heads of
domestic oil producers on Tuesday, ahead of a gathering in
Vienna of the Organization of the Petroleum Exporting Countries
and its allies on Dec. 6-7.
    "The idea at the meeting was that Russia needs to reduce.
The key question is how quickly and by how much," said one
source familiar with the talks between Russian oil firms and the
ministry.
    "Most people agreed that we cannot reduce immediately, it
needs to be a gradual process like last time," said the source,
who asked not to be identified as he is forbidden from speaking
to the media. The Energy Ministry declined to comment.
    Russian oil companies Rosneft  ROSN.MM  and Gazprom Neft
 SIBN.MM  declined to comment. Lukoil  LKOH.MM , Tatneft
 TATN.MM , Surgutneftegas, Gazprom  GAZP.MM  and Novatek
 NVTK.MM  did not immediately respond to a request for comment.
    OPEC and its allies led by Russia have been restraining
production under a pact reached in late 2016 to prop up oil
prices. 
    Moscow agreed to curb output by 300,000 barrels per day, or
one sixth of the overall cut of 1.8 million bpd, but Russian
companies took several months to reach that level of reduction.
    Now, Riyadh has suggested OPEC and its allies reduce output
by 1 million bpd from January 2019 to arrest a price decline as
Brent crude  LCOc1  fell below $59 a barrel this week from as
high as $85 in October due to concerns about a possible glut.
    If Russia bore the same proportion of such cuts as it did
under the existing agreement, its share of the reduction would
amount to 166,000 bpd.
    "It was also said that reducing by one sixth this time is a
big ask," the source said.
    A second source briefed on the discussions said: "We need to
reduce but would not want to reduce by much."
    OPEC and its allies will be meeting amid concerns over a
slowing global economy and rising oil supplies from the United
States, which is not involved in the existing pact.
    Saudi Arabia is coming under renewed pressure from U.S.
President Donald Trump, who has asked the kingdom to refrain
from output reductions and help to lower oil prices further.
    Possibly complicating any decision at next week's talks is
the crisis around the killing of journalist Jamal Khashoggi at
the Saudi consulate in Istanbul last month. Trump has backed
Saudi Crown Prince Mohammed bin Salman despite calls from many
U.S. politicians to impose stiff sanctions on Riyadh.
    Russian President Vladimir Putin will meet Prince Mohammed
in Argentina at this weekend's G20 summit, which Trump is also
to attend. 
    Moscow has so far not committed to any new production cuts.
    On Wednesday, Putin said Russia was in touch with OPEC but
Moscow would be satisfied with an oil price of $60 a barrel.
Putin previously said Russia would be content with oil at $70.
    "We are in contact with OPEC and we are ready to continue
our joint efforts if needed," Putin said.
    Saudi Energy Minister Khalid al-Falih said on Wednesday the
kingdom would not cut oil output on its own.
    "We generally have our reservations about the likelihood of
a 2016-style cooperation this time around, though the Russian
position will undoubtedly be crucial," JBC Energy think-tank
said in a note.

 (Editing by Dale Hudson)
 ((Dmitri.Zhdannikov@thomsonreuters.com;))
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