Prices will continue to rise! Russia plans to reduce oil discounts

Russian business media RBK reported on Monday that the Russian government plans to continue to reduce the discount of its flagship crude grade, Urals, relative to the Brent benchmark, citing the draft budget of the Russian Federation for 2024-26.

The report states that it is expected thatThe discount will be gradually reduced from the current $20 per barrel to $6 in 2026Next year, the discount will be $15 a barrel, and in 2025 it is expected to be $10 a barrel

Since December, when the European Union imposed an embargo on Russian oil and the G7 set a price cap, Moscow has adjusted the way it assesses oil prices for tax purposes, introducing a discount on the Brent benchmark, which sets the country's minimum price for crude oil for budgetary purposes. The move is intended to offset the impact on budget revenues from the fall in the price of Urals, which was at one point about $35 to $40 a barrel lower than Brent.

In July, Russian President Vladimir Putin signed an amendment to the energy sector tax code, reducing the discount on Urals to Brent crude from $25 to $20 a barrel starting in September.

According to RBK, the planned discount adjustment will increase Russia's budget by 860.90 billion rubles ($8.90 billion) next year, another $9.70 billion in 2025 and another $8.90 billion in 2026.Oil and gas revenues are expected to jump from $92 billion in 2023 to $119 billion in 2026.

Previously, according toIndustrial foreign exchangeAccording to reports, the Russian government is developing its own national oil benchmark index system, which will be calculated based on trading on the St. Petersburg International Commodity Exchange (SPIMEX). RBK said it expects to start operating in early 2024 and will also be used to calculate oil taxes.

It is worth noting that with the narrowing of discounts offered by Russian oil, India's competitiveness as a traditional crude oil supplier in the Middle East has increased. Foreign media pointed out that,The days of India buying cheap Russian crude may be over.

Hardeep Puri, India's oil minister, said earlier that "our dependence on Russian oil will be significantly reduced and the cost viability in the Gulf is now more attractive".

According to data from data intelligence firm Kpler,India's imports from Russia fell for the third consecutive month in August1.57 million barrels a day, down 24 percent for the month, the lowest level since January, although Russia remains India's top crude supplier.

On the other hand, as Russia's fuel export ban prompted buyers to look for new supplies, New York stood out as an unlikely diesel supplier, shipping three shipments in a week.

Three vessels, the Mantaro I, the Nord Master and the Sti Queens, loaded a total of more than 1 million barrels of diesel or gasoline from the International-Matex terminal in New York Harbor over the past week, according to Kpler data compiled by foreign media. So far this month, the figure has averaged 41,000 barrels per day, the highest monthly level since June 2020.

New York, which is usually short of diesel and relies on imports from Europe and Canada, has been a net exporter every month since July, according to Kpler data. That has pushed the region's distillate stocks, which include diesel and heating oil, to their second-lowest level this year.

According to Ship Tracking and Kpler, two of the three cargoes loaded this week will head to Europe, while the Sti Queens will arrive in Paranagua, Brazil, in two weeks' time. Brazil has been the biggest buyer of Russian diesel this year, displacing imports from the US Gulf Coast, which has seen monthly exports slide this month due to ongoing maintenance work.