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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Russia Sees Oil & Gas Income Fall By Almost $40 Billion

Russia’s revenues from oil and gas will be US$39.5 billion (3 trillion rubles) lower than planned, due to the tumbling oil prices, Russian Finance Minister Anton Siluanov said on Wednesday, adding that Russia’s budget will be in deficit this year.

The coronavirus pandemic and the lower economic activity, coupled with oil prices half the level before Russia and Saudi Arabia broke up the OPEC+ production cut deal two weeks ago, will weigh on Russia’s budget this year, which will tip into deficit.

Russia’s economy is not going as well as one would have hoped, the finance minister admitted today, saying that the oil price factor alone is set to reduce the country’s budget income by nearly US$39.5 billion compared to earlier estimates.

In case of budget deficit, Russia will use reserves from the National Wealth Fund (NWF), Siluanov said on Wednesday.

According to analysts at Gazprombank, cited by Reuters, the fund has enough reserves to compensate for lower budget revenues due to low oil prices for more than five years.

Last week, a day after oil prices collapsed in the worst drop in nearly three decades—courtesy of the renewed Saudi-Russia rivalry on the oil market – Russia’s Finance Ministry said that Moscow had enough resources to cover budget shortfalls amid oil prices at $25-30 a barrel for six to ten years.   Related: Coronavirus Could Bankrupt 20% Of European Oilfield Services

The price of the Russian export grade Urals dropped far below $42.40 a barrel as oil prices tumbled by 30 percent after Saudi Arabia launched an all-out price war with Russia following the collapse of the OPEC+ group.

The $42.40 Urals price is the price at which Russia’s budget is balanced, the Russian Finance Ministry said last week, noting that the country’s NWF had as of March 1 liquid assets worth US$150.1 billion, or 9.2 percent of Russia’s gross domestic product (GDP).

Lower oil prices are likely to persist for some time, considering the huge demand destruction in the coronavirus outbreak and the coming flood of extra supply on the already oversupplied market as both Russia and Saudi Arabia pledge to boost supply in the new feud between the former allies. 

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Smooth Rough on March 18 2020 said:
    Time for compromise? Half a loaf of bread is better than no loaf.
  • Steven Conn on March 18 2020 said:
    The National Wealth Fund, which is kept in dollars/euro/pounds is used in rubles for domestic spending. Therefore, it grows in potential size as the ruble weakens. Furthermore, the rubles are bought on the forex market via selling of dollars/euro/pounds and so it helps prevent potential shortages of hard currency in Russia and helps keep the ruble from depreciating further: they sell hard currency and they buy up rubles. On March 1st, 2020 the official fund was $123.4 billion. So in the most negative scenario, it would last 3 years if the state has to plug $40 billion is shortfalls each year. Does anyone think US shale production will not decline by autumn 2020? Saudi budget deficit was projected around $50 billion in 2020 when the prices were at $50-$55/barrel. Oil production decline will happen naturally in US shale and Canadian oil sands.
  • Ste on March 18 2020 said:
    Russia is so full of shit! They are lying their butts off!
  • Alex Kurmakov on March 19 2020 said:
    Time to Attack Saudi Arabia , they want war, they must pay the price for ruin million of people

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