Oil did not notice the ceiling – Kommersant FM

Russia earns more from oil trading than before the introduction of a ceiling on it by the G7 countries and the European Union. According to Bloomberg estimates, profits from the sale of raw materials in October 2023 were the highest since May 2022, amounting to $11 billion. This is about a third of the country’s total budget revenues that month. According to Indian customs statistics, the average price of Russian oil in 2023 is about $72 per barrel, which is $12 higher than the price ceiling set by Western countries. However, President Vladimir Putin has banned deliveries under contracts that provide for this limit.

According to Bloomberg, the five largest corporate buyers remain unknown. Officially, it is received by LUKOIL, Chinese and Indian oil corporations. At the same time, record revenues from October sales are unlikely to be broken in the near future, noted Sergei Kondratyev, head of the economic department of the Institute of Energy and Finance:

“We can talk about two reasons here. The first is a macroeconomic factor: we have seen fairly high oil prices and a fairly low ruble exchange rate.

This situation is in many ways similar to the picture in the spring of 2022, when extreme indicators of profitability of the oil and gas sector for the federal budget were also recorded.

The second factor is that after the expansion of the practice of using additional income tax and the transition of many fields in Russia to paying it, the seasonality of this indicator has significantly increased, because AIT is collected on a quarterly basis. Accordingly, in April, July and October we see significantly higher oil and gas revenues.

As for buyers of raw materials, if we are talking specifically about countries, there is quite a high certainty here. We understand that Russian oil is now sent mainly to the markets of China, India and Turkey.

If we are talking about the corporate sector, then perhaps the share of traders in the market has increased compared to 2019, including because there are simply more spot sales. However, the situation is now very volatile.

I think we may see some slight decline in oil prices in the coming month. And if the ruble exchange rate remains in the current range, then oil and gas revenues are unlikely to break the current record. But they still remain high in terms of historical levels.”

On average, about 3.5 million barrels per day were exported from Russia in 2023. 70% of oil cargo, as Bloomberg writes, was transported in the first nine months of the year. At the same time, in addition to Russian ships, the “shadow fleet” also participated in the export. Greek maritime transport reportedly accounted for 20% of all shipments, more than any other country transported.

However, the impressive October earnings were largely influenced by internal price determination mechanisms, explained leading expert of the National Energy Security Fund Igor Yushkov: “The statistics are correct. The question here lies in many methodological details. Firstly, the ruble exchange rate has indeed devalued to a certain extent. Secondly, the calculation methodology may not entirely reflect reality.

For example, the Ministry of Finance is forced to use data from Argus. Previously, its experts asked traders in the ports of Rotterdam and Sicily how much they paid for Russian oil. Thus, they had an adequate average price.

Since December 2022, domestic raw materials do not go there at all, so they take its cost at the ports of shipment and estimate how much insurance and delivery to Rotterdam and Sicily would cost. This synthetic figure is given to the Ministry of Finance. He is obliged to use it, because the methodology is approved by law.

So the income is large, and this is mainly due to the fact that, firstly, the price of raw materials has generally increased, and secondly, the discount on Russian oil compared to other types is constantly decreasing.

September is probably the period of the smallest discount. Already in the second half of November, oil prices generally went down, and the difference between the Russian Urals and the Brent grade averaged $10, that is, the discount may have grown a little. Therefore, probably, a repetition of such a record is not yet expected.”

Meanwhile, on December 6, on the London Stock Exchange, the price of Brent fell below $76 per barrel for the first time since July.

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Ulyana Gorelova