Negative discount: why Russian oil has become more expensive than Western oil
The value of the Russian Urals export brand exceeded the quotes of the North Sea benchmark Brent by $ 8 per barrel. There has not been such a difference since the spring of this year. The main reasons were the new escalation in the Middle East, as well as the growing demand from China. Why Urals is so popular, what price increases mean for the Russian budget, which is experiencing difficulties with filling primarily in the oil and gas sector this year, and how much military action around the Arabian Peninsula can accelerate oil prices in general— is in the "Izvestia" material.
Inverted discount
Historically, Urals (which accounts for about 70% of all oil exported from the country) traded at a discount to the North Sea benchmark due to its higher sulfur content and density. Normally, the difference ranged from $2 to $5 per barrel, and after 2022, this discount reached double digits (up to $20 and even more) due to sanctions pressure. Now the price tag is inverted. The first time this happened was after the outbreak of the war in Iran, and now, by mid-September, the spread had reached its spring peaks again.
The premium of $8 per barrel of Urals is formed not in Europe (which has long ceased to be the main consumer of this brand), but on Asian trading platforms. To understand the situation, it is necessary to separate stock futures and physical supplies. Brent quotes in London are under pressure from concerns about a recession in Western economies and the sale of the last US strategic reserves. At the same time, factories in China and India face a shortage of oil, especially designed for their production capacities (changing the brand of raw materials is a difficult task for many refineries).
Recently, Saudi Arabia stopped the East–West pipeline (Petroline), through which oil was pumped bypassing the Strait of Hormuz. The failure of this highway has deprived Asian importers of their last reliable insurance. Demand for raw materials from key buyers of Russian oil has increased sharply. They are willing to overpay for guaranteed delivery. Nikolay Dudchenko, an analyst at "Finam" Financial Group, points to an indicative statistic: on the Shanghai International Energy Exchange, the cost of a barrel has already exceeded $130. Under these conditions, Urals shipped through the ports of the Far East (Kozmino) or via the protected Northern Sea Route receives an additional cost. The current $8 above the Brent price is a payment for the absence of military risks during transportation.
It is worth adding a few more factors to this. China has significantly reduced its oil consumption in 2026. But this was largely due to the active spending of strategic and industrial reserves (perhaps even more significant than in the United States). However, due to the incomplete transparency of Chinese statistics, it is impossible to accurately determine the volume of raw materials used.
In addition, investors are concerned about the closure of the Bab-el-Mandeb Strait. According to some reports, the Yemeni "Ansar Allah" (Houthis) movement has already begun mining it. The situation is currently shrouded in the fog of war, but the threat is very real.
Half a billion before the plan
It is logical to assume that the sale of oil at such a margin will provide the Russian Ministry of Finance with a large-scale surplus. However, macroeconomic statistics show a different picture. Revenues are growing, but the state treasury is still under strain. According to the plan for the current year, the budget should receive a little more than 8.9 trillion rubles from the oil and gas sector. In practice, in the first eight months, the fees amounted to a little over 5 trillion rubles.
"Finama" analyst considers the probability of fulfilling the annual plan to be quite low, even taking into account high world prices.
"According to our estimates, in the most optimistic scenario, the gap from the plan will amount to 400-500 billion rubles," Nikolai Dudchenko predicts.
This fiscal gap is explained by three factors. Firstly, the physical volume of exports is limited. Spring drone attacks on Russian refineries and OPEC+ deals forced production cuts. Secondly, the strong ruble exchange rate, which was established in some months, "ate up" the dollar premium when converting export earnings into the national currency. Thirdly, there is a time lag mechanism in the calculation of taxes (mineral extraction tax and mineral extraction tax), which is why summer price fluctuations will affect receipts only in late autumn. Russian oil companies are making the most of the situation commercially, but the treasury is replenishing more slowly than expected.
Another strategic strait
An escalation in the south of the Arabian Peninsula could cost the global oil market dearly. The current effects on the global logistics of black gold can be doubled if the Bab-el-Mandeb Strait stops working smoothly. When the Red Sea is permanently closed to any commercial shipping, the global oil trade will effectively split into two isolated hemispheres. Europe will finally lose access to the remnants of Asian and Middle Eastern diesel fuel, relying solely on expensive raw materials from the United States and West Africa. Asia, in turn, will be cut off from Atlantic supplies.
In such a scenario, the global market, according to experts, risks missing another 4% of the total supply. At the moment, the price explosion is being held back by the fact that Chinese oil demand remains below pre-war levels, and importing countries continue to burn accumulated commercial and government reserves. But these buffer tanks are rapidly emptying.
"As reserves decrease and oil production decreases, prices may continue to rise," Nikolai Dudchenko believes.
Although it is difficult to name exact price levels, "Finam" assumes the probability of a return of Brent quotations to around $ 120 per barrel, which was already fixed during the acute phase of the crisis this year. With the closure of Bab-el-Mandeb, the premium for the Russian Urals brand in Asia can expand to $15-20, as Chinese and Indian factories will be completely dependent on supplies from the Russian Federation.
Even for those oil producers who do not directly suffer from logistical problems, this development does not bode well in the longer term. Extremely high prices for raw materials are starting to work towards a forced cooling of the economy. Prolonged retention of the cost of a barrel in the range of $120-130 will inevitably lead to a decrease in business activity in energy-intensive sectors.
As prices rise, as Nikolai Dudchenko summarizes, demand will begin to decline amid the global recession. The balance in the oil market will be leveled by displacing the weakest consumers. Exporters will have to pay for the excess profits of 2026 in the future: a deep industrial recession will destroy some of the demand, which will take years to recover. The current premium on Russian oil, therefore, has a positive effect on Russian exports only in short-term scenarios.
Переведено сервисом «Яндекс Переводчик»
