Russian Urals oil prices collapse to $34 per barrel

Russian Urals has fallen to historic lows amid new US sanctions that are making logistics and sales difficult.

Last week, Russian Urals oil in the Baltic Sea cost $34.82/barrel, and in the Black Sea — $33.17/barrel. For comparison, the benchmark Brent traded around $61/barrel, Bloomberg reports.

The pressure on the price is associated with the autumn package of US sanctions against the two largest Russian oil companies. Despite the fact that Rosneft exports have not stopped, supplies have become more difficult. For example, India expects lower volumes as early as next month.

The Kremlin publicly assures that discounts on Urals will “narrow” over the next few months. However, the prolonged stay of prices at low levels directly affects the possibilities of financing the war: oil and gas provide about a quarter of the revenues of the Russian federal budget.

Meanwhile, the “instant” discount on Urals during export is on average about $27/barrel, and by the time it arrives in India, it is reduced to ~$7.50/barrel. Analysts add: the lower the price of Russian oil, the stronger the financial incentive for refineries and traders to ignore the restrictions. This behavior has repeatedly smoothed out initial price drops.

The fiscal picture for the Russian Federation is worsening. In November, oil and gas revenues fell by 33.8% y/y (and by 40.3% m/m due to the payment of NDDP in October) to 530.9 billion rubles. Over the 11 months of the year, revenues from energy resources decreased by 22.4% (–2.3 trillion rubles) to 8.0 trillion rubles. The Ministry of Finance was forced to cut the plan for 2025 by almost a quarter to 8.65 trillion rubles. against the previously expected ~11 trillion.

USM also recently wrote that the EU is imposing new sanctions against ships carrying Russian oil.