The price of Russian oil is moving in the right direction – towards a critical level for Russia
7 April 2025 19:04
Due to the collapse in the global oil market caused by Donald Trump ‘s trade war and OPEC’s decision to further increase production, the price of Russian Urals oil has dropped to $52 per barrel. This is approaching the lowest level for the entire period of the war against Ukraine and is almost $20 lower than the budgeted amount for the current year, "Komersant Ukrainian" reports, citing Russian media.
According to the Argus Media analytical agency, on Friday, the price of Urals crude oil loaded in the Baltic port of Primorsk was $52.76 per barrel. This is 25% lower than the budgeted price of $69.7.
At the end of last week, the global market experienced a sharp collapse, causing the price of benchmark Brent crude to fall by 12.5% and close at $65.58. On Monday, the price dropped to $62.51 per barrel, later rising to about $63.5.
In March, Deputy Finance Minister Vladimir Kolychev said that the Ministry forecasts the average oil price in 2025 to be closer to $60. As a result, he said, the budget deficit could increase by 1% of GDP (this year’s budget is set at 0.5% of GDP). However, the price could be even lower. In March, the average price of Urals was $58.99 per barrel, according to the Ministry of Economic Development, while the average price of Brent was $72.5 per barrel. That is, the discount of Urals to Brent amounted to $13.51, and if it continues, Russian oil may cost about $50 or even less.
This is precisely the lowest level that has been observed during the entire period of the full-scale Russian-Ukrainian war. In the first three months of 2023, the average monthly price of Urals, which is calculated for taxes, was about $49 per barrel. But while it later rose along with world prices, now the Russians have no reason to be optimistic.
“The scale of the sales suggests that the market is pricing in a significant drop in demand due to growing fears of a recession,”
– ING analysts write. Current price levels imply a decline in average daily demand by 1 million barrels by the end of this year, resulting in a year-end demand that will not change compared to 2024, ING believes.
The price of Brent is likely to fluctuate in the range of $60-65 per barrel now, but this is without a deterioration in fundamentals, market analysts say.
In March, even before the global market plummeted, Russia had already collected 15% less oil taxes than a year earlier. According to Bloomberg estimates based on data from the Russian Ministry of Finance, the budget, which consists of oil and gas revenues by about 30%, received 956.8 billion rubles due to slowing demand in China, a general decline in world prices due to increased production outside OPEC countries and the effects of President Joe Biden’s “farewell” January sanctions on Russian oil.
In its February risk review, the Bank of Russia warned of the threat of a prolonged period of low oil prices, as in the 1980s and 1990s.
“After a period of high oil prices in 1974-1985, 18 (!!!) years of low prices followed.”
– said the presentation of the Central Bank of the Russian Federation (quoted by Reuters, which has read the document).
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Should we expect problems for Russia?
Russian Urals oil is traditionally sold cheaper than Brent and WTI, and it is also under pressure from additional factors that raw materials from other countries do not experience, namely Western sanctions. However, throughout the three years of the full-scale war with Ukraine, Russia has been successfully selling its oil – its main buyers today are China and India.
Unfortunately, market analysts’ forecasts do not yet promise Russia serious problems related to the price of oil, 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 .
Therefore, the most likely way to hurt Russia over oil is 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.
However, if the current downward trend in prices continues, the $45 figure no longer looks fantastic.
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