India Looks Elsewhere For Oil As Russia Looks To Lower Crude Discount To $20/bbl

The Russian finance ministry is planning on decreasing the current discount used for determining taxes on the country's crude oil exports from USD 25 to USD 20 per barrel, according to Reuters. The decision to modify the way oil sales are taxed comes in response to various factors, including western sanctions related to Russia's invasion of Ukraine, the USD 60 per barrel price cap on Russian crude exports, and the European Union's import ban. 

In February, Russian President Vladimir Putin signed a law fixing the discount on Russia's primary Urals blend of crude oil for tax calculations. According to Finance Minister Anton Siluanov, the ministry plans to implement this change, and additional measures are being considered to enhance the calculation of oil export taxes. 

Despite a budget deficit estimated to be around two per cent - 2.5 per cent of the gross domestic product by the end of the year, Siluanov expressed confidence in meeting planned expenses due to the availability of sufficient resources. However, Russia's crucial oil and gas revenues saw a significant decline of 47 per cent year-on-year in the first six months, attributed to lower Urals crude prices and reduced natural gas exports. 

In response to the challenging economic situation, Russia is also reportedly contemplating introducing quotas on the export of oil products to stabilise gasoline prices globally, as gasoline wholesale prices reached an all-time high. The escalating prices of Russian oil have prompted some buyers, such as India, to consider increasing purchases from traditional sources in the Middle East. 

Moreover, Moscow aims to reduce its third-quarter crude export plans by 2.1 million tons in line with a previously stated pledge to cut overseas shipments by 500,000 barrels a day, which aligns with earlier commitments made by Russia and Saudi Arabia to reduce production and contributed to the recent rally in crude prices that began in late June.