Rosneft struck a deal with Swiss-based trading house Trafigura for pre-payment financing.
After being turned down by oil trader Vitol for $2 billion in exchange for oil supplies, Rosneft, Russia’s largest oil producer was finding it difficult to close a deal to sell future supplies mainly due to sanction restrictions over Ukraine. Under those sanctions, imposed by the U.S., access to any financing in USD is restricted for long term deals. However, financing that covers 30 days is allowed and it seems that this may become more common for oil producers who have lost their cash-rich status due to the 50% decrease in oil prices.
The new deal between Rosneft and Trafigura covers the pre-financing of 500,000 tonnes of Baltic Sea oil cargoes to help with the Russian company’s $7 billion debt, due on 13 February. The deal is in addition to an existing agreement between the parties where Rosneft signed, before sanctions were issued, to deliver 150,000-200,000 tonnes of oil a month.
Now that the usual channels for expensive loans are closing down to oil producers with depreciated capital assets, pre-export financing deals from alternative sources such as oil traders will become more common. They guarantee supply, Russian companies can sidestep the long-term restriction sanctions, and the loans are cheaper for the lenders on pre-payment terms versus direct loans.
Rosneft shares have increased by 7.8% since close of market on Wednesday when the deal was announced.
MT4 chart: Rosneft
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