As Russian military planes pound Syria, the ruble, stocks and bonds are projecting an uncommon level of giddiness on the part of traders.
A week after Vladimir Putin embarked on air strikes on Islamic State, the attacks are infuriating Turkey, NATO calls them a “troubling escalation” and the U.K. says the Kremlin is making the situation in the region “much more dangerous.” Even so, the ruble is enjoying its best start to an October on record, and the RTS stock index is having its strongest showing in a decade.
The reason? Oil.
The correlation between Russia’s currency and the price of its main export is at an all-time high. Add to that the surge in appetite for emerging-market assets as traders push back the timing of an interest-rate increase by the Federal Reserve. Some investors are unfazed by Russia’s maneuvering in Syria or sanctions over its role in Ukraine.
Petrogrand and Shelton Petroleum have agreed to form a combined and enlarged oil group with Russian oil assets exclusively and to dissolve the cross-ownership between the two companies.
Urals Energy, the independent exploration and production company with operations in Russia, has been granted an additional license by the Russian regulatory authorities to expand the boundaries of its license area at Arcticneft.
Oil gained after Russian air strikes in Syria drew condemnation from the US and its allies, increasing tension in the Middle East.
Futures in New York advanced as much as 2.2 percent. Russian planes are targeting Islamic State, al-Qaeda affiliated Nusra Front and other armed groups, Foreign Minister Sergei Lavrov said Thursday. US data Friday may show the labor market is improving in the world’s biggest oil user, with 201,000 jobs added last month, according to a Bloomberg survey.
“We need to start putting some geopolitical risk premium in the oil price,” Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said in a note. “There are many countries active in some way in Syria and it is not yet clear how each will react to the increasing Russian open military action.”
Russian oil output rose to a post-Soviet record last month as producers take advantage of the weak ruble to push ahead with drilling.
The nation’s production of crude and condensate advanced to 10.74 million barrels a day, 1 percent more than a year earlier and topping a record set in June, according to data from the Energy Ministry’s CDU-TEK unit.
Russia’s oil industry begins a critical battle over taxes this week. Losing may result in the first decline in crude production at the world’s largest energy exporter since 2008.
Russia’s Economy Ministry criticized a proposed tax increase on the nation’s main revenue source, crude producers, saying it may hurt output and the budget in the long term.
The oil-extraction tax formula proposed by the Finance Ministry last week would hurt “the economics of working deposits and in fact would ’kill’ production at the most efficient fields in terms of tax performance,” Deputy Economy Minister Nikolay Podguzov said.
“Clearly, if production decreases, taxes also fall.”
In the race to supply crude to the world’s biggest energy user, it’s the tussle for second place that’s too close to call.
Russia, Angola and Iran are vying to be runner-up to Saudi Arabia as the top seller to China. The contest is set to intensify as Iran seeks to recover market share lost because of sanctions and the US Congress debates a nuclear deal that’ll allow the Persian Gulf state to boost shipments.
China overtook the US as the biggest importer of crude most recently in June, taking advantage of a 50 percent slump in benchmark prices over the past year to boost strategic reserves. With the Asian nation forecast to account for more than a quarter of global demand growth in 2016, the prize of becoming a top supplier will bolster the economic health of national producers that depend on energy exports for most of their budget revenue.
Few things have more potential to spook the oil market than the prospect of Russia joining forces with OPEC. Speculation that such a move was afoot last month drove crude to its biggest three-day gain in 25 years.
Despite the market buzz, there are sound economic and technical reasons why this is unlikely to happen.
OAO Rosneft will sell a stake in one of its largest oil-producing projects to ONGC Videsh Ltd., the overseas arm of India’s biggest explorer.
The unit of state-owned Oil & Natural Gas Corp. will take a 15 percent share in Vankorneft, Russia’s second-largest oil producing development, the companies said at a signing ceremony Friday in Vladivostok, in Russia’s Far East. ONGC will have a right to two directors on Vankorneft’s board and Rosneft will keep control of the project operations, including the Vankor- Purpe pipeline, the companies said. The deal is pending regulatory approval.
Russia’s largest oil producer Rosneft saw its second quarter profit fall but a weak rouble helped soften the hit by countering the slump in the price of oil.
Russia's second-biggest gas producer Novatek is close to selling a 9.9 percent stake worth an estimated $900 million in its Yamal liquefied natural gas project to a Chinese investment fund, Kommersant business daily reported on Monday.
The deal may close in the coming weeks, the daily quoted three sources familiar with the talks as saying. It quoted one of source as saying the buyer was China's infrastructure fund Silk Road.
Russia's Eurasia Drilling on Thursday reported a first-half net profit of $91 million, down by half on a weak rouble, low oil prices and lower demand from top customer Lukoil.
Eurasia, in which Schlumberger is awaiting Russia's permission to buy a 45.65 percent stake, said revenue fell by 40 percent to $923 million.
Further writedowns on Austrian oil and gas group OMV's ailing Samsun gas power plant in Turkey are possible and the facility could be sold, the head of OMV's downstream division, Manfred Leitner, told Reuters.
OMV this month booked an impairment of 205 million euros ($227 million) at Samsun, where regulatory measures are weighing on margins.
"I wouldn't rule out further impairments in the future," Leitner said in an interview late on Tuesday, adding he did not expect more writedowns this year at Samsun, which now has a book value of around half its original 600 million euro price tag.
TCO said it has expanded its workforce by a third after strong sales results for the company.
The well completion technologies provider has employed eight new members of staff within the past six months for its UK base, including a new managing director.
Paul Betteridge was appointed in March in response to company growth and to focus on TCO’s international expansion.
Russian energy company Rosneft said on Monday it had registered to take part in the 13th licensing round organised by Brazilian national energy agency Agencia Nacional do Petroleo, Gas Natural e Biocombustiveis. Rosneft said that 10 oil basins and blocks, located onshore and offshore, would be put up for sale at the licensing round.
Oil & Natural Gas Corp. is seeking through its overseas unit to buy a stake in Russia’s second-largest oil producing development from OAO Rosneft, according to two people with direct knowledge of the plan.
ONGC Videsh Ltd. is in discussions to purchase a share of the Vankor oil field in East Siberia, said the people, who asked not to be identified because discussions are ongoing. The New Delhi-based company is seeking to pay $900 million for the stake, which will secure about 3.5 million metric tons of oil a year (about 70,290 barrels a day), and expects to sign a deal as early as next month, one of the people said.
Gazprom Neft, the oil arm of state gas producer Gazprom, posted 73.2 billion roubles ($1.14 billion) in net profit for the second quarter, up 47 percent year-on-year, thanks to the weak rouble, the company said on Thursday.
Gazprom Neft, one of a few growing Russian oil firms by output, said its revenue was at 423.2 billion roubles compared to 429.3 billion roubles a year ago.
Austrian oil and gas group OMV's new chief executive is looking towards Russia for low-cost energy sources to boost the company's upstream business, which has been squeezed by low crude prices.
Though OMV's downstream refining and marketing operations bolstered second-quarter results posted on Wednesday, CEO Rainer Seele cast a wary eye over margin prospects for that side of the business and sees exploration as key for the longer term.
OMV has placed its bets on expensive but stable exploration projects in the North Sea as output in Yemen and Libya stalls, and Seele is keen to maintain the upstream focus.
Gazprom PJSC, the world’s biggest natural gas producer, said first-quarter profit rose 71 percent as a weaker ruble countered lower prices for the fuel and falling sales volumes.
Net income climbed to 382 billion rubles ($5.9 billion) from 223 billion rubles a year earlier, the Moscow-based company said Monday in a statement. That exceeded analysts’ average 353 billion-ruble estimate, according to data compiled by Bloomberg. Revenue rose 5.7 percent to 1.65 trillion rubles.
Russia has submitted its bid for vast territories in the Arctic to the United Nations.
It is claiming 1.2 million square kilometres (more than 463,000 square miles) of Arctic sea shelf, the Russian foreign ministry said.
Russia, the US, Canada, Denmark and Norway have all been trying to assert jurisdiction over parts of the Arctic, which is believed to hold up to a quarter of the planet’s undiscovered oil and gas.
Russian Energy Minister Alexander Novak said on Friday that talks were ongoing with Ankara on the TurkStream gas pipeline project and that Moscow had agreed for a 10.25 percent gas price discount for Turkey.
Russia and OPEC are pursuing the same goals of keeping the oil market balanced and stable, Energy Minister Alexander Novak told OPEC Secretary-General Abdullah al-Badri on Thursday.
OPEC decided in June to keep oil production unchanged in a bid to defend its market share. Russia has also refused to take any action to support oil prices which have more than halved since last year.
"The global oil market is being affected by various political factors. In particular, ... the agreement on Iran ... and its consequences ... will have an impact on the market," Novak said during a visit to Moscow by Badri.
