Russia Oil Price Falls to Pre-Iran War Level
Russia’s flagship crude price has slid to levels seen before the conflict in the Middle East, piling more pressure on Kremlin coffers that are already strained by the invasion of Ukraine.
The Urals grade averaged $41.66 a barrel at Russia’s western ports in the first three days of July, less than half the level during the height of the oil market turmoil in April, according to Argus Media data. Russia’s Finance Ministry uses the data to calculate taxes.
The initial figures signal a headache for Moscow, which enjoyed windfall revenues driven by the Middle East conflict. Russia had emerged as one of the big winners when the effective closure of the Strait of Hormuz choked off Persian Gulf supplies, while US sanctions waivers helped stoke appetite for the country’s barrels.
Every month since March, Urals crude averaged more than the $59 a barrel assumed in the budget for this year, including $60.92 a barrel in June, when traffic through Hormuz picked up after Washington and Tehran signed an interim deal to reopen the vital waterway.
A surge in revenues allowed Russia, which relies on oil and gas to fund about a fifth of its budget, to resume replenishing its rainy-day fund for the first time in almost a year and delay cutting non-priority spending.
Now, if prices remain below the budget threshold for a prolonged period of time, that would further complicate the Kremlin’s ability to keep a widening deficit in check, with a costly war against Ukraine well into its fifth year. In the first five months of this year, the fiscal gap grew to 6 trillion rubles ($77 billion), or 2.6% of GDP, exceeding the target for the whole of 2026 by roughly 60%.
As Russia’s oil taxes are calculated with a time lag, a drop in crude prices in July will be reflected in the nation’s budget in August.
The $41.66-a-barrel Urals price doesn’t include shipping costs. The grade’s average discount to global benchmark Dated Brent widened to $27.35 a barrel on Friday, according to Argus. By the time the barrels reach India, the discount narrows to $8.55 a barrel, the data show.
It’s unclear whether the so-called delivery spread — the gap between export and delivered prices — ultimately accrues to Russia.
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