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According to Reuters, Russia’s federal budget, heavily reliant on oil and gas revenues, is projected to face a significant decline in December. This downturn is attributed to falling international oil prices, the strengthening of the ruble, and the escalating impact of U.S. sanctions. Estimates suggest that revenue from this sector could plummet by nearly 50% compared to the same period last year, reaching its lowest point in over five years.
Specifically, Russia’s oil and gas revenues for December are forecasted to drop to approximately $5.15 billion, equivalent to 410 billion rubles. This figure represents a nearly 50% decrease from December 2024 and marks the lowest level since August 2020, when oil prices crashed due to reduced global demand during the COVID-19 pandemic. The last time Russia recorded a similar revenue level was in August 2020, at around $5.1 billion.
This downward trend began in November, with Russia’s oil and gas revenues estimated to have fallen by 35% year-on-year. The decline is primarily driven by sharply lower export prices for Russian crude oil, coupled with the ruble’s appreciation, which diminishes the value of revenues when converted to local currency. This situation places considerable strain on the budget, particularly as Moscow heavily depends on oil and gas revenues to fund public spending and its operations in Ukraine.
Another critical factor is the weakening performance of Urals crude oil, Russia’s primary oil grade. In recent weeks, Urals prices have continued to decline, influenced by new U.S. sanctions targeting major Russian oil companies such as Rosneft and Lukoil. The price differential between Urals and Brent crude has widened to its highest level since May 2023, significantly reducing actual revenues from crude oil exports.
In addition to lower prices, Russia’s oil export volumes have also decreased. According to the International Energy Agency (IEA), total Russian oil exports, including crude oil and petroleum products, fell by approximately 420,000 barrels per day in November, dropping to 6.9 million barrels per day. This reduction is attributed to buyers temporarily limiting transactions to assess risks and the implications of U.S. sanctions.
Regarding crude oil trade with India, Russia’s largest customer, analysts warn that stricter U.S. sanctions could jeopardize Russia’s position as India’s top crude oil supplier—a title it has held for the past two years. If this occurs, Saudi Arabia and other Middle Eastern exporters are likely to swiftly reclaim market share.
Source: Reuters
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