Image Source: Pixabay

Urals and Brent, as of today:

Source: Tradingeconomics.com accessed 11/22/2023.

Latest discount relative to Brent is approximately $17.75.

Important? After all, Russia’s GDP has not taken much of a hit (of course, much of GDP is now devoted to war production so ex-military output growth in 2023 is negative 2% or less,). The oil price is relevant to Russia’s ability to continue to finance the war without resorting to (yet faster) inflation? From the Economist, October 31.

… After recording a deficit of 1.8trn roubles in January, the government has kept its budget balanced for the remainder of the year thanks to a 26% jump in non-oil and gas revenues. “In the third quarter of this year we had a budget surplus of over 660bn roubles,” Vladimir Putin boasted this month.

But the fiscal outlook rests on shaky assumptions. The draft budget assumes that oil and gas revenues will increase by more than a quarter in 2024 to 11.5trn roubles, on the expectation that Brent crude will average $85 per barrel and Urals crude $70. If oil prices drop, revenues will come in below target. The budget also assumes that the rouble will average roughly 90 to the dollar in 2024. If the currency appreciates, however, earnings on oil and gas exports will fall in rouble terms, squeezing government revenues. gdp growth may also fall short of expectations. The finance ministry has pencilled in 2.3% for 2024, more than double the imf’s forecast.

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