Oil will soon fall in price, but not so much that Russia will feel bad
4 September 08:44
On Thursday, oil prices continued to fall, deepening the decline of more than 2% recorded in the previous trading session. Investors and traders are closely watching the upcoming OPEC meeting, where producers are expected to consider another increase in production targets. This was reported by "Komersant Ukrainian" with reference to Reuters.
The price of Brent crude oil fell by 46 cents (0.7%) to $67.14 per barrel as of 06:16 Kyiv time. U.S. West Texas Intermediate fell 47 cents (0.7%) to $63.5 per barrel.
OPEC’s decision and its consequences
Eight OPEC members plan to discuss further production increases in October at a meeting on Sunday, two sources familiar with the talks told Reuters. The group is seeking to regain market share.
“Brent crude is under pressure again as OPEC considers the possibility of producing additional barrels in the fourth quarter. If this happens, it could worsen the expected oversupply, especially at a time of weak demand,”
– aNZ Research analysts said in a report for clients.
OPEC has already agreed to raise production targets by about 2.2 million barrels per day from April to September, in addition to a 300,000 bpd quota increase for the United Arab Emirates.
Over the past few months, despite accelerated production growth, Middle East oil prices have remained the strongest among regional prices in the world. This has strengthened the confidence of Saudi Arabia and other OPEC members in the need to increase production, according to a report by Haitong Securities.
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Analytical forecasts
Vivek Dhar, an analyst at Commonwealth Bank of Australia, pointed out that another factor that is likely to prompt OPEC to increase quotas from April is the desire to capture a larger market share.
“This means that OPEC is more comfortable with a lower Brent price, around $60 to $65 per barrel, than their previous target of $70,” Dhar said,
– mr. Dhar said.
Therefore, Brent futures are likely to fall into the $60-65 range, which will push WTI to the high $50-low $60 range. This, in turn, will call into question the economic feasibility of increasing the supply of shale oil in the United States.
Data on oil reserves in the US
Market participants are also awaiting government data on crude oil inventories in the United States, which are due to be released on Thursday. These stocks increased by 622,000 barrels in the week ended August 29.
The API’s estimate of crude oil inventory growth in the US contradicts the forecasts of analysts polled by Reuters, who on average expected US crude oil stocks to fall by 2 million barrels.
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 September 2, the price of Russian Urals was $62.21 per barrel. Against this backdrop, the Russian state budget deficit has already amounted to 4.88 trillion rubles, or 2.2% of GDP, and more than a trillion of this has been accumulated over the past month. 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 .
As you can see, Russian Urals oil is currently trading a few dollars cheaper than WTI. If the forecasts given here come true, then even then Urals will be taken at a price of around $55 per barrel.
Therefore, the more likely way to hurt Russia over oil is still to tighten 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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