In Oil Market Standoff with Saudi Arabia, Weakened Rouble Helps Russia

In contrast, Saudi Arabia’s riyal is pegged to the dollar at a rate of 3.75 riyals.

SEATTLE (Oil Monster): In Russia’s battle for oil market share with Saudi Arabia, a sharp fall in the rouble has handed the Russians one advantage - they can now produce cheaper than the Saudis, according to Reuters calculations.

The Russian currency has lost nearly a fifth of its value against the U.S. dollar - the currency of oil - since their talks on coordinated output cuts collapsed on March 6.

Brent crude futures have fallen by nearly 50% to about $26 a barrel and that has knocked the rouble, which is down more than 15% to 80 per dollar, its weakest level since early 2016.

In contrast, Saudi Arabia’s riyal is pegged to the dollar at a rate of 3.75 riyals.

Russian producer Rosneft’s lifting costs last year averaged 199 roubles per barrel of oil equivalent, or $3.10, versus Saudi Aramco’s at 10.6 riyals or $2.80, financial reports from the two firms show.

Rosneft’s costs have now fallen to $2.50, below Aramco’s, according to Reuters calculations based on the current rouble rate against the dollar.

Rosneft did not reply to a Reuters request regarding how the rouble’s recent fall had affected its costs.

“As highlighted in our recent 2019 full-year financial results, Saudi Aramco maintained its position as one of the lowest cost producers globally,” Aramco said in reply to a Reuters request for comment.

Courtesy: www.reuters.com