Russian Oil Giant Rosneft Exits Venezuela Operations As Stock Price Struggles to Recover

Russian Oil Giant Rosneft Exits Venezuela Operations As Stock Price Struggles to Recover
Written by:
Michael Harris
29th March, 17:05
Updated: 3rd April, 04:36
  • Rosneft to transfer all Venezuelan assets to a state-owned company in Russia
  • U.S. hit two subsidiaries of Rosneft with sanctions for buying crude from Venezuela earlier
  • Rosneft stock price struggles to recover amid the coronavirus outbreak and low oil prices
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Rosneft (MCX:ROSN) has decided to terminate all operations in Venezuela to avoid the U.S. sanctions against this South American country. The oil giant has transferred all assets to another Russian company, fully owned by the government.

Fundamental analysis: Rosneft moves to protect its position

In what appears to be a move to avoid the U.S. wrath, Rosneft has decided to get rid of all assets in Venezuela. Igor Sechin, CEO of Rosneft and a long time ally of Vladimir Putin, said that the oil giant will exit “all assets and trading operations of Rosneft in Venezuela and/or connected with Venezuela will be disposed of, terminated or liquidated.”

All assets will be transferred to another Russian company, fully owned by the state of Russia. The name of the company is not disclosed.

Rosneft owns multiple joint ventures, oil-field services companies, and has trading activities in Venezuela. This move comes just two days after the U.S. government indicted the Venezuelan President Nicolás Maduro and several of his top aides for allegedly leading a narcoterrorist conspiracy.

“They didn’t want to lose those assets right now. It seems like a logical step,” said Francisco Monaldi, a Venezuelan oil expert at Rice University in Houston.

The Trump administration placed Rosneft under fresh pressure when it hit two Rosneft subsidiaries with sanctions for selling crude to European customers. Rosneft was helping Venezuela’s PDVSA to export crude oil as the state-owned company struggles to export its oil amid tightening sanctions.

By getting rid of Venezuelan operations, Rosneft officials believe that the U.S. will wave sanctions against the oil giant.

“We really have the right to expect American regulators to fulfill their public promises,” said Rosneft spokesman Mikhail Leontyev.

Technical analysis: Shallow recovery attempts

Rosneft stock price trades around 40% lower compared to the January highs on the back of the collapsing oil prices and the coronavirus outbreak that will cause a significant slowdown in the global economic and business activity.

Rosneft stock monthly chart (TradingView)

As seen in the chart above, the price action has created two monster bearish candles on the monthly chart. As a result, shares of Rosneft have traded at multi-year lows this month. The price action is currently testing the 100-MMA (the blue line), a key horizontal support. A break of this level would open the door for a test of the 200 mark.

Summary

The new wave of U.S. sanctions on Venezuela and companies that buy crude oil from Venezuela’s PDVSA has forced the Russian oil giant Rosneft to exit all positions and operations in Venezuela. All assets will be transferred to the state-controlled company as Rosneft hopes to get its name removed from the U.S. sanction list.

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