Imaginary stability: how much Russia loses due to the fall in the price of export oil

What is happening today with the supply of raw materials abroad

The situation with the export of Russian oil is stable, despite the sanctions imposed by the EU by the G7 countries, said Deputy Prime Minister Alexander Novak. At the same time, the Ministry of Finance reported that the average cost of a barrel of domestic brand Urals fell in January in annual terms by almost two times. How do these two news fit together, and what is actually happening today with energy supplies from the Russian Federation abroad? The answer obviously does not lie on the surface, and that is also because the Federal Customs Service stopped publishing export statistics since last spring.

Therefore, there is no exact official data on where, in what volumes and for what amount Russia has sold anything since at least the spring of 2022. One can, of course, agree with the Deputy Prime Minister’s statement that “all the necessary measures have been taken, and our companies, first of all, to find new supply chains, markets, transportation of our oil – it finds its demand in other markets.” But if you start to go into details, referring to alternative sources of information, the picture that emerges is far from benevolent.

The average price of Urals, the main export grade for the Russian Federation, was $49.5 per barrel in January. Whereas a year ago – $ 85.6. Apparently, this is one of the consequences of the price “ceiling” of $ 60, earned on December 5th. And since February, the Russian response began to operate: now exporters are prohibited from prescribing in contracts that they agree with the limit.

“There are no Russian official statistics, but I think that after December 5, the volume of deliveries decreased to some extent,” says Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation. – This was indicated not only by the data of international agencies, but also indirectly by the situation with the ruble, which at a certain moment noticeably weakened. Less currency began to come into the country. It seems that the shortage of tankers for the transportation of oil has affected: among the international carriers, only Greek companies turned out to be at our disposal, the rest “waved their hands”. Our oil market has entered a period of adaptation to new realities. By the way, exports could be reduced due to storms, in particular, in Novorossiysk.”

At the same time, according to Yushkov, in just January, Russia actually restored the daily volumes of deliveries in physical terms – those that were before the introduction of December sanctions. Novak, apparently, had in mind just this circumstance. The Ministry of Finance, having reported a 70% drop in the price of Urals, pointed to a year-long time distance, and this is a fundamental difference.

“The physical volumes of exports (deliveries by sea) have practically not decreased over the year and are at the level of about 3 million barrels per day,” said Artem Deev, head of the analytical department at AMarkets. – But the composition of buyers has changed: if a year ago they were mainly European countries, today they are representatives of the Asia-Pacific region, primarily India and China. Also in the statistics is a growing proportion of states that foreign analytical agencies indicate as “unknown”.

But in monetary terms, the situation is much less optimistic. Indeed, the average Urals price in January was $49.5 per barrel. And the benchmark Brent traded at $84 on average. That is, the Urals discount to Brent in January amounted to about $35 or 41%. But in December it was even higher – 43%, Russian oil was sold at an average of $46.8 per barrel. Today, as market participants adapt to new restrictions, the discount is gradually decreasing, and the average cost of Urals in foreign markets is growing. But if the price “ceiling” is revised to the level of $50 per barrel (the US is planning this in March), then Russian oil is expected to fall in price. As Deev recalls, with its cost of $50 per barrel, the budget is losing 2 trillion oil and gas revenues a year against the plan of 8 trillion rubles. In this case, the budget deficit may reach not 3.3 trillion rubles, as last year, but 5 trillion.

“It is quite difficult to determine reliably the total export volumes, since this information is closed today,” says Mark Goykhman, chief analyst at TeleTrade. – According to Bloomberg, offshore shipments have not declined: at the end of January they averaged 3.3 million barrels per day, which is approximately the same as before the embargo. “The situation is stable” in terms of physical volumes of maritime exports, you can’t argue with Novak here. But the loss of Russian suppliers is due to the huge discounts they now have to accept in the oil trade. Raw budget revenues from exports may turn out to be less than the planned (even with the embargo) 8.9 trillion rubles. There is a possibility that they will not exceed 7-7.5 trillion.”