The Russian currency has lost nearly a fifth of its value against the U.S. dollar – the currency of oil – since their talks on coordinated output cuts collapsed on March 6.
Brent crude futures have fallen by nearly 50% to about $26 a barrel and that has knocked the rouble, which is down more than 15% to 80 per dollar, its weakest level since early 2016.
In contrast, Saudi Arabia’s riyal is pegged to the dollar at a rate of 3.75 riyals.
Russian producer Rosneft’s lifting costs last year averaged 199 roubles per barrel of oil equivalent, or $3.10, versus Saudi Aramco’s at 10.6 riyals or $2.80, financial reports from the two firms show.
Rosneft’s costs have now fallen to $2.50, below Aramco’s, according to Reuters calculations based on the current rouble rate against the dollar.
Rosneft did not reply to a Reuters request regarding how the rouble’s recent fall had affected its costs.
“As highlighted in our recent 2019 full-year financial results, Saudi Aramco maintained its position as one of the lowest cost producers globally,” Aramco said in reply to a Reuters request for comment.
Aramco has said it will be supplying, both domestically and for export, a record high 12.3 million barrels of oil per day (bpd) for the next few months starting from April.
Russia’s production is currently 11.30 million bpd, led by state-run Rosneft. Russia may add up to 500,000 bpd in a matter of months, officials have said.
The two sides have led cooperative efforts by more than 20 oil-producing countries to curb output and thereby support prices since January 2017.
But that cooperation is set to end on March 31 and both sides have made plain they aim to raise output to claw back market share lost to the United States and other producers who were not part of the curbs.
“Our estimates show that there are two countries with the most negative situation: Russia and Saudi Arabia. This is all about their economic capacity, reserves,” Leonid Fedun, co-owner of No. 2 Russian producer Lukoil , told news outlet RBC. “This will be a war until exhaustion.”
Russia has already tapped its sovereign wealth fund for emergency rouble support while Saudi Arabia is cutting state spending and launching new stimulus measures.
Rosneft boss Igor Sechin has called the coordinated output cuts harmful for producers, saying they were destroying Russia’s oil industry while making room for increased supply from U.S. shale producers.