Oil prices rise due to escalation in the Russian-Ukrainian war
2 September 08:40
Oil prices rose on Tuesday amid growing fears of supply disruption due to the escalation of the Russian-Ukrainian conflict. This was reported by "Komersant Ukrainian" with reference to Reuters.
According to OilPrice.com, the price of Brent crude oil rose by 27 cents, or 0.40%, to $68.42 per barrel as of 08:30 Kyiv time. U.S. West Texas Intermediate rose to $64.91 per barrel, up 90 cents or 1.41% over the previous trading session.
According to Reuters, the recent attacks by Ukrainian drones have led to the shutdown of Russian refining facilities, which account for at least 17% of Russia’s total oil refining capacity, or 1.1 million barrels per day.
Russian-Ukrainian war
On Sunday, Ukrainian President Volodymyr Zelenskyy said that Ukraine is planning new strikes deep into Russian territory after weeks of intensified attacks on Russian energy facilities.
Three and a half years into the war, Russia and Ukraine have intensified air strikes in recent weeks. Russia has been attacking Ukraine’s energy and transportation systems, while Ukraine has been striking at Russian oil refineries and pipelines. And these strikes are very worrying for the oil market.
“The risks to Russia’s energy infrastructure remain high. Ukraine struck additional Russian refineries last weekend, intensifying its attacks on infrastructure,”
– daniel Hines, senior commodity strategist at ANZ, said in a note on Tuesday.
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China, India, OPEC
China’s vision of a “new world order” could potentially increase geopolitical tensions. On Monday, Chinese leader Xi Jinping presented his vision of a new global security and economic order that prioritizes the “Global South” during a summit with the leaders of Russia and India, a direct challenge to the United States.
China and India are the largest buyers of Russian oil – Russia ranks second in the world in terms of exports of this raw material. Trump has imposed additional tariffs against India over such purchases, but not against China.
Investors are awaiting a meeting of OPEC members on September 7 to get any hints on further production increases by the group.
How to hurt Russia over oil
It is well known that Russia is critically dependent on its energy exports. First of all, on oil exports. In 2024, the Russian federal budget revenues from oil sales amounted to 9.19 trillion rubles (approximately $89.4 billion). Total budget revenues for this period amounted to 36.71 trillion rubles. Thus, the share of oil revenues in the total structure of Russian budget revenues in 2024 was approximately 25%
This indicates that, despite international sanctions and attempts to diversify revenue sources, oil remains a key source of financing for the Russian budget.
Russian Urals oil is traditionally sold at a lower price than Brent and WTI, and it is also subject to additional factors that raw materials from other countries do not experience, namely Western sanctions. However, during all three years of the full-scale war with Ukraine, Russia has been successfully selling its oil – its main buyers today are China and India.
The federal budget of the Russian Federation for 2025 included an oil price of $70. However, according to the Ministry of Finance, on August 29, the price of Russian Urals was $62.89 per barrel. Against this backdrop, the Russian state budget deficit has already amounted to 4.88 trillion rubles, or 2.2% of GDP, of which more than a trillion was incurred in July this year. This hole in the treasury is almost 4.5 times higher than in the same period in 2024, when the deficit was 1.1 trillion rubles, or 0.5% of GDP.
So far, market analysts’ forecasts do not promise Russia any serious problems related to the oil price, as it still has a very large backlash for sales. According to economic expert Oleg Pendzin, even a price of $50 per barrel is still acceptable for Russia.
“Currently, the direct cost of Russian oil production is about $37-38 per barrel. This is the direct cost. The critical figure for Russia is the sales price of $45,”
– the economist explained exclusively for .
So the more likely way to hurt Russia over oil is still to increase sanctions, including secondary sanctions against its buyers. The point of this step is to make it physically impossible for Russia to sell large volumes of oil and thus receive funds to continue its aggressive war of aggression. Trump’s tariffs against India are aimed at exactly that.
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