The Urals crude oil price hit the local bottom. According to data presented by the Norwegian oil giant Neste, Urals crude oil had to be paid only $ 63.22 on Monday. a barrel, or less than $ 23. less than Brent crude oil. There have been no such low prices since April 2021. Currently, the Russians get $ 6 for oil. below the average level for which they sold the raw material last year, i.e. before the war. And yet war costs a lot.
One of the reasons for the decline in Russian oil prices was the general decline in oil prices in the world. On Monday, September 26 the price of the European grade Brent fell by as much as 3.8 percent, and the American WTI – by 2.6 percent. On a weekly basis, it is already 10 percent. for both species. There was a slight rebound on Tuesday, but prices at $ 84 respectively. and $ 75 are already similar to those from the beginning of this year, which we may see soon at petrol stations.
But there is another serious reason that could seriously undermine the Kremlin’s finances. This is India, which, after Putin unleashed the war, has become the second most important recipient of Russian oil after China.
Russian oil too expensive for India
Until recently, Indian refineries intercepted all Russian types of oil, taking advantage of the rebates resulting from sanctions on Russia. But recently something has changed.
According to Reuters, later this month India’s refineries are expected to skip loading Russian ESPO oil (Eastern Siberia Pacific Ocean), because higher freight rates have made this particular type of oil more expensive. According to Amit Bilolikar, Bharat Petroleum Corp’s deputy general manager, freight from Russia increased by $ 5-7. per barrel and deliveries from West Africa have become more attractive in terms of price, reports Reuters.
And Russia is trying to reduce the rebate offered to customers to a dozen or so dollars, added Amit Bilolikar on the sidelines of the 38th annual Asia Pacific Petroleum Conference (APPEC). It can be seen from the recent Urals and Brent quotes – the difference (differential) fell below $ 23. on Tuesday and is the lowest since March 7 this year. Until August, it was over $ 33, and at the extreme point in April this year. – as much as $ 37
This shows that Russia wants to avoid the impact of the fall in world oil prices on its finances at all costs, but market conditions do not allow it too much under sanctions.
Besides, not only oil prices were falling, but also gas prices. In Europe, contract prices for October fell to EUR 174 per MWh on Monday. It’s still horrendously expensive, but firstly it’s half the price at the end of August, and secondly, Russia no longer sells significant quantities to Europe. She has suspended the deliveries herself, arguing that due to the sanctions, it is not possible to transport Nord Stream 1, and Nord Stream 2 has even recently recorded leaks. And it does not sell Polish gas via the Yamal gas pipeline, because PGNiG does not want to pay rubles contrary to the contract.
On Tuesday, the price of gas rebounded by 10%, but the trend in September was clearly downward.
The tycoon is losing strength
As analysts of the American research company Emerging Markets Internet Securities (EMIS) indicate, Russia is one of the world’s leading suppliers of crude oil and natural gas thanks to its location on huge hydrocarbon deposits. In 2021, she was responsible for 12.2 percent world oil production, ranking third behind the United States and Saudi Arabia, as well as 17.4 percent. natural gas, which gave it second place, second only to the US.
In the same 2021, Russia was there second after Saudi Arabia exporter of crude oil (12.8% of global sales)and the world’s largest exporter of natural gas, selling almost a quarter (23.6%) of global volume. EMIS analysts emphasize that last year the country ruled by Vladimir Putin produced 285.1 million tonnes of refining products (fuels), of which 144 million tonnes were sold abroad. More than half (52%) of these exports, i.e. 75 million tonnes, went to the European Union at that time.
At the end of August, when gas prices in Dutch contracts were reaching historic heights, information appeared about large-scale combustion of excess gas by Russia near the border with Finland. There was nowhere to sell this gas. Experts said the gas was originally intended for Germany. Currently, according to Russia, the transport of Nord Stream 1 is impossible for technical reasons, and Nord Stream 2 has not received German certification. Anyway recently there is a leak on it.
Author: Jacek Frączyk, journalist at Business Insider Polska