Export deals with China are helping insulate two of Russia’s biggest energy producers from the rout that sent emerging-market equities to a one-year low yesterday.
OAO Rosneft, the world’s biggest publicly traded oil producer by output, rose for a second day to a one-month high of $7.005 by 9:55 a.m. in London after signing a $270 billion oil supply deal with state-run China National Petroleum Corp. that includes $70 billion in prepayments. OAO Novatek reached a four-month high after a separate agreement with CNPC to supply liquefied natural gas to Asia. The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in the U.S. slid 0.8 percent yesterday to the lowest level since June 5, 2012.
The deals will help the Russian companies pare borrowing and give them access to the world’s largest energy consumer and second-biggest economy, which is forecast to grow 7.4 percent in 2013 as the European Union contracts, according to Andrey Polischuk, an analyst at ZAO Raiffeisenbank in Moscow.
“For Novatek, this means a reduction in the financing of a major project,” Polischuk said in a telephone interview. “With Rosneft, the prepayment virtually covers its entire debt load.”
The MSCI Emerging Markets Index has dropped 7.1 percent and Russia’s benchmark Micex has lost 2.5 percent since June 18, the day before Federal Reserve Chairman Ben S. Bernanke said the central bank may pare bond purchases this year. In the same span, Novatek has climbed 2.7 percent and Rosneft is up 2.6 percent.
The Bloomberg Russia-US Equity Index retreated to a one-year low in New York yesterday. The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, slid 0.8 percent to $24.56.
MSCI’s benchmark index for emerging-market equities climbed 0.4 percent today, the first increase in six days. RTS Index futures added 2 percent to 124,560. The RTS Volatility Index, which measures expected swings in futures, decreased 5.8 percent to 33.6000.
Rosneft became the world’s biggest publicly-traded crude producer by output after buying TNK-BP for $55 billion this year. The company has $71.8 billion in outstanding debt, and its net debt is the third-highest in the world among 521 oil and gas companies with a market value of at least $500 million, according to data compiled by Bloomberg.
The agreements with China “offer the opportunity to provide incremental financial resources to further Rosneft’s exploration and production program,” the company’s press office in Moscow said in an e-mailed response to questions. Press officials didn’t elaborate on the planned prepayments.
Rosneft “can now replace short-term debt with longer duration, lower the cost of that debt and be less susceptible to the vagaries of the oil price,” Julian Rimmer, a trader at CF Global Trading UK Ltd. in London said by e-mail.
Rosneft is considering the possibility of buying OAO Bashneft, Vedomosti reported, citing people familiar with Bashneft shareholder AFK Sistema. Rosneft’s spokesman declined to comment today, while Sistema’s spokeswoman Yulia Belous said that Sistema has not received any offer from Rosneft.
Crude for August delivery rose 0.5 percent to $95.62 a barrel on the New York Mercantile Exchange. Brent oil for August settlement gained 0.4 percent to $101.53 a barrel on London’s ICE Futures Europe exchange. Urals crude, Russia’s major export blend, rose 0.3 percent to $101.11.
Rosneft gained 1.9 percent in London today while Novatek added 0.5 percent.
Novatek invited CNPC to acquire 20 percent of the planned $20 billion Yamal LNG project and agreed to supply at least 3 million tons of the chilled fuel by tanker to the Beijing-based company. Now limited to Russia’s domestic market, Novatek is awaiting the government’s decision on loosening OAO Gazprom’s control over LNG shipments abroad.
Novatek will benefit from the money raised by selling a stake in the project, and the biggest advantage may be winning a guaranteed market for exports, according to Kirill Bagachenko, who manages about $3 billion in Russian equities at TKB BNP Paribas Investment Partners in St. Petersburg.
“Novatek secured gas demand,” Bagachenko said in an e-mail. “It may be quite tricky in the future as there is a number of projects whereas global demand growth is limited.”