MOSCOW (Reuters) - Rosneft said on Friday it has enough oil to fulfil new contracts with Swiss trader Glencore as markets gear up for a fierce battle between some of the world’s largest merchants for supplies from the Russian company.
Moscow said this week that a consortium of Glencore and Qatar would buy a 19.5 percent stake in Rosneft for over 10 billion euros in one of the biggest energy deals of 2016.
Glencore said it would inject only 300 million euros of its own equity into the deal while getting a contract for an extra 220,000 barrels per day of supply from Rosneft.
Most analysts saw the deal as a cheap way for Glencore into getting ahead of rivals - Trafigura and Vitol - in securing lucrative Russian barrels.
However, traders said it was unclear where Rosneft would get the oil volumes for Glencore before 2018 unless it decided to scrap some of its existing deals with rivals.
“The volumes of the new contract (with Glencore) have been calculated based the already existing contracts and production plans,” Rosneft said in written comments to Reuters.
“Rosneft has enough resources to fulfil the obligations.”
Glencore, the world’s second largest oil trader after Vitol, has long been a core partner with Russia, trading commodities from aluminum to grain and held minority stake in aluminum producer Rusal and mid-sized oil firm Russneft.
In 2013, Glencore and Vitol joined forces to loan Rosneft $10 billion and help it buy rival oil firm TNK-BP - in exchange for huge oil supplies of 67 million tonnes over 5 years.
But then Russia came under U.S. and European sanctions for its actions in Ukraine which made it much more difficult to lend more money to Rosneft.
However, rival Trafigura, the world’s third largest oil trader, found a way to provide Rosneft with short-term funding, not covered by sanctions. As a result, Trafigura now handles the biggest volumes from Rosneft.
“I really don’t know where Rosneft can get new volumes for Glencore. They either have to cancel existing contracts or have a deal to start supplies only from 2018,” said a Russian crude trader familiar with Rosneft’s oil flows.
Another trader said he also saw no spare volumes that Rosneft could allocate to Glencore. “Maybe they will grow cooperation in refined products,” he said.
Rosneft, which exports around 110 million tonnes of oil a year via European and Pacific ports as well as to China, will need to find some 11 million tonnes of extra crude for the new contract with Glencore, traders say.
Trafigura and China’s CNPC, the biggest buyers of Rosneft volumes, purchase about 23 million tonnes per year each which makes them also the biggest importers of Russian crude oil.
Prior to the new agreement, Glencore was buying 8.5 million tonnes a year and Vitol 5 million under contracts that do not expire before 2018.
The remaining volumes are either committed to European and Asian refiners PKN Orlen, Lotos, Total, Shell and Eni, Ruhr Oel, Chemchina and JX Nippon or sold under short-term contracts to various trading houses until March.
Traders said in theory from March, Rosneft could stop holding short-term tenders for oil from the Baltic and the Black Sea to free up volumes for Glencore.
But such a strategy could be risky as Rosneft needs tenders to guarantee attractive pricing for much bigger long-term deals.
Rosneft has also acquired smaller rival Bashneft but most of its exports have been also pre-sold to Vitol until 2021.
“What is clear is that competition is heating up and someone is set to lose if Glencore was to obtain full volumes,” one of the traders said.
Additional reporting by Dmitry Zhdannikov, editing by David Evans