Ruble retreat helps Russia in its oil confrontation with Saudi Arabia

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Photo from Reuters archive of an employee preparing banknotes from the Russian ruble at the Krasnoyarsk Company in Russia.

LONDON / DUBAI (Reuters) – A sharp decline in the ruble is giving Russians an advantage in their war over oil market shares with Saudi Arabia – as they can produce at lower cost than the Saudis, according to Reuters accounts.

The Russian currency has lost about a fifth of its value against the US dollar – the currency of oil trading – since the collapse of production coordination talks on March 6.

Brent crude futures fell about 50 percent to about $ 26 a barrel, causing the ruble to fall, as it fell more than 15 percent to 80 rubles per dollar, at its weakest level since early 2016.

In contrast, the Saudi riyal is pegged to the US dollar at a price of 3.75 riyals.

Last year, the cost of selling oil to Russian producer Rosneft reached 199 rubles per barrel of oil equivalent on average, equivalent to $ 3.10, while the cost to Saudi Aramco was 10.6 riyals or $ 2.80, according to the financial reports of the two companies.

But the cost of Rosneft has now fallen to $ 2.50, down from the cost of Aramco, according to calculations by Reuters from the current ruble exchange rate against the dollar.

Rosneft did not respond to a Reuters request for comment on how the recent ruble downturn has affected its costs.

In response to a request from Reuters, Aramco said, “As our financial results for the whole of the newly released 2019 show, Saudi Aramco has maintained its position as one of the lowest cost producers in the world.”

Press coverage by Dmitriy Gidanikov in London, Rania Al-Jamal in Dubai and Olesya Astakhova in Moscow – Co-covered by Andrei Ustroch and Alexander Marrow in Moscow – Prepared by Ahmed Elhamy for the Arab Bulletin

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