Moscow has extended the period of reducing the production of «black gold» until July
Moscow has found a way to cut the amount of discounts that domestic oil exporters are forced to give to Asian customers due to Western sanctions imposed for the export of Russian hydrocarbons. According to Deputy Prime Minister Alexander Novak, the reduction in the production of «black gold» by 500,000 barrels per day in March, which our country voluntarily decided on, led to a reduction in the discount on oil of the domestic export grade Urals.
Russia extended the period of production cuts until July. True, will such a maneuver allow to strengthen the export earnings of our country – big question.
Compared to mid-January, the discount on Russian oil, with which our raw materials are bought by current foreign consumers, has decreased by an average of $ 8 per barrel, the Deputy Prime Minister said. According to Novak, this was the result of Moscow's earlier decision to voluntarily reduce the daily production of raw materials by 500,000 barrels, approved at first only for March, and then extended until the middle of this summer.
« and stabilization of the situation, the establishment of logistics chains and transport supplies, the discount will continue to decrease, — encouraged the Deputy Prime Minister.
The discounts at which our producers now have to export oil are due to the package of sanctions imposed against our country by the members of the G7 and the European Union. It is like a price «ceiling» at $60 per barrel of Russian raw materials, introduced by the West in December last year, and on transport restrictions on supplies to the states of the Old World through pipelines and sea routes. As a result, the export of «black gold» to the market of the continent, according to Bloomberg, fell by 54%, to 1.6 million barrels; per day.
True, at the same time, daily deliveries of Russian oil to China increased by a quarter and reached a record level of almost 2 million barrels. In order to quickly realize the released volumes, Russia was forced to offer its Asian partners a significant discount. According to the Energy Development Center, the difference between the sale of a barrel of Urals and Brent exceeded $30, of course, not in favor of West Siberian energy carriers.
At the end of February, the Tax Code was amended to prevent exporters from offering foreign buyers too «generous» discounts – in order not to sharply reduce the volume of tax revenues to the treasury. What will happen next with the cost of the Urals brand and discounts for it? This question «MK» addressed to the experts.
«Reducing oil production in Russia by 500 thousand barrels per day – rather, a forced step due to the decline in the export capabilities of our country. Nevertheless, it is impossible not to admit that the discount is still gradually decreasing: if in January a barrel of Russian «black gold» traded at an average of $47, in February its price rose to $49.5, and in March the domestic «barrel» reached $55.
Buyers are gradually getting used to the new conditions of supply, when Russia acts around various restrictions from the West, including cargo insurance.
Now, for Russian oil, Brent oil quotes on the world market are becoming much more important, the cost of which is falling due to fears of a global recession against the backdrop of a banking crisis in the US and Europe. Under such conditions, even if the Urals discount to the North Sea Brent grade decreases even more, the final cost of our raw materials will not increase much. The course to reduce production will continue, as Western restrictions have been introduced on the purchase of Russian oil products, the sale of which will fall. As a result, production will have to be reduced, since domestic refineries, in the face of declining exports, will not be able to process significant volumes of «black gold», but such an initiative may not bring additional Urals dollars.
“The decline in production in Russia has affected domestic oil companies. In order to offset the loss of profit from the reduction in production, they began to slightly reduce the discount on Russian oil. From April 1, our country decided to tie the mineral extraction tax (MET) to the cost of the Urals export grade, while limiting the discount on raw materials. Now producers have to make a choice: either put up with the increase in fiscal payments, or seek higher rates from importers. Most likely, commodity holdings have already begun to prepare for this and reduce the discount for the new formula for calculating the MET.
However, new risks have also emerged. According to the representatives of the European Union, economic pressure on Moscow will continue, and the next package of anti-Russian sanctions will provide for the improvement of the mechanism for monitoring the implementation of restrictions by third countries. With increasing pressure, it will become much more difficult to keep importers and reduce the discount, so it is not certain that the current measures will lead our energy industry to the desired result.
“It is quite possible to reduce the discount with stable demand for energy resources. With cuts in production and supply, competition between buyers interested in raw materials increases. At the same time, reserves are being formed, while the discount is still significant.
A full discount is unlikely to return the difference between Urals and Brent to the previous values of $2-3 per barrel, but to a level of 10-15% (even taking into account the fall discounts, the North Sea mark is still trading at 25% more expensive than the Russian «black gold») reduction of discounts is quite feasible.