Oil Prices Rise After U.S. Sanctions Rosneft Unit

Date : 02/19/2020 @ 8:39PM
Source : Dow Jones News

Oil Prices Rise After U.S. Sanctions Rosneft Unit

By Anna Isaac 

Oil prices climbed Wednesday as investors weighed the U.S. sanctions imposed on a subsidiary of Russian-oil giant Rosneft.

Global benchmark Brent crude rose 2.4% to $59.12 a barrel. Prices have recovered some of their 2020 slide so far this month, and analysts said the upswing has been further supported by the new sanctions. Prices are still well below their early year peak, but they also got a boost Wednesday after China launched new measures to support local businesses that are struggling because of the coronavirus outbreak, easing some worries about lower fuel demand. U.S. crude oil advanced 2.4% to $53.29 a barrel Wednesday.

The move Tuesday by the U.S. will limit Rosneft's exporting activity, analysts said, and could reduce the supply of oil to Indian and Chinese refiners -- two of its Swiss-based trading arm's most important customers.

Rosneft Trading SA, a subsidiary of Rosneft Oil Co., has been receiving crude from Venezuela in lieu of payments for loans made to the country's state oil company, Petróleos de Venezuela, SA, or PdVSA, according to analysts.

A person answering the phone at Rosneft Trading in Switzerland directed a request for comment to its parent company in Moscow. A call to that office went unanswered on Wednesday.

PdVSA is already subject to U.S. sanctions, and the move against Rosneft's trading subsidiary comes after a two-year pressure campaign by the U.S. to funnel funds away from the regime of Venezuela's President Nicolás Maduro.

"The United States is determined to prevent the looting of Venezuela's oil assets by the corrupt Maduro regime," said U.S. Treasury Secretary Steven Mnuchin on Tuesday. The U.S. is bidding to replace Mr. Maduro and wants Juan Guaidó recognized as Venezuela's legitimate leader.

The restrictions to the Geneva-based Rosneft Trading SA came with a warning from the U.S. administration that anyone doing business with the trading arm could be hit by further sanctions.

"Venezuelan crude oil barrels were being sold by Rosneft Trading, [which had been] picking up cargo for repayment of debt and reselling it," said Helge Martinsen, senior oil analyst at DNB Markets. "It helped get exports out of Venezuela flowing again. Clearly, the U.S. saw that and wanted to clamp down on it."

Venezuelan gold has also been targeted by U.S. sanctions, leading to elaborate efforts to evade detection of exports from the country.

"The sanctions are on the Swiss company, not on the Russian company, so there are a lot of loopholes. But counterparties will have risk managers and others looking again at connections to Rosneft," said Olivier Jakob, managing director at consulting firm Petromatrix. "The message is if you're a trader and you have a role in exporting Venezuelan oil, then the U.S. will come for you."

The U.S. has previously tried to dissuade Russia from its support for Mr. Maduro, and President Trump is due to visit India later this month, after the country recently signed a deal with Rosneft.

"There may also be some larger, geopolitical power plays going on here," Mr. Jakob said.

Write to Anna Isaac at anna.isaac@wsj.com


(END) Dow Jones Newswires

February 19, 2020 15:24 ET (20:24 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

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