Russian Deputy Prime Minister Aleksandr Novak has announced that discounts on Russian oil exports have been reduced from $35-$38 per barrel to $11-$12 per barrel due to high global demand. Novak further stated that the price cuts may shrink by another $5 per barrel. This reduction in discounts is a direct result of the stabilization of transport and logistics chains and the establishment of new markets and partnerships with friendly countries.
The Russian government previously announced its intention to gradually decrease the discount on its flagship Urals blend of crude oil to the international Brent benchmark. The Finance Ministry’s budget policy document indicates that the discount is expected to reach $6 per barrel by 2026. In 2022, the discount is projected to be $15 per barrel, and by 2025, it is expected to decrease to $10 per barrel.
Novak emphasized that the discount is determined by market forces and reflects the market value of Russian petroleum products. When risks are high, such as restricted supply or geopolitical tensions, the discount increases. Conversely, when risks decrease, the discount also decreases.
The global oil market has experienced a significant surge in prices, with a nearly 30% increase in the third quarter of this year. This surge can be attributed to production cuts agreed upon by OPEC and its allies, including Russia, which have restricted supply.
The reduction in discounts on Russian oil exports signals the strong demand for Russian energy products on the global market. Russia’s ability to stabilize its export flows and establish new markets has contributed to the increase in competitiveness. The higher competition for Russian oil products has led to a natural reduction in the discount.
Overall, the reduction in discounts on Russian oil exports reflects the steady demand for Russian energy products and the country’s ability to establish new markets and partnerships. As global demand for oil remains high and supply becomes restricted, the prices of Russian oil are expected to remain stable or even increase in the coming years.